Tesla Cash Call: $1 Billion -- WSJ
March 16 2017 - 3:02AM
Dow Jones News
By John D. Stoll
Tesla Inc. said it is on track to launch a more affordable car
this year, but it needs to raise $1 billion to make sure it
happens.
The Silicon Valley electric-vehicle maker said Wednesday it is
offering $250 million in common stock and $750 in convertible notes
to strengthen a fragile balance sheet amid a risky ramp-up of Model
3 production. Billed as a cheaper offering by a company known for
pricey super cars, the Model 3 is intended to sell in much higher
volumes than the current models and compete with more mainstream
brands.
Tesla shares gained 2.3% to $261.50 in after-hours trading.
Analysts had expected Tesla to seek as much as $2.5 billion in the
near-term, citing its inflated market value (which is near Ford
Motor Co.'s market capitalization).
Tesla is a perennial money loser, however, notching two
profitable quarters since going public early in the decade. Deeply
indebted and planning to increase production capacity, the company
needs a cushion to move ahead in the capital-intensive auto
industry.
Tesla has more than $2 billion due in 2018 -- a year during
which Tesla aims to sell significantly more vehicles than last
year. It also plans to continue investing heavily in overhead and
product creation in coming years.
The company plans to make 500,000 cars a year by the end of 2018
and 1 million vehicles in 2020. It is a long way off from that
mark. Last year, Tesla produced nearly 84,000 vehicles.
Chief Executive Officer Elon Musk signaled the need for more
financing last month, a move his company has made several times in
recent years even as it has consistently notched year-over-year
quarterly revenue increases. Already Tesla's largest shareholder,
Mr. Musk intends to buy about 10% of the common stock Tesla will
issue in the public offering.
Mr. Musk has laid out plans for more electric models, including
heavier-use products, such as a bus-like vehicle, and a pickup
truck. With last year's acquisition of SolarCity Corp., he is
laying the groundwork to turn Tesla into a sustainable energy
company offering solar power, batteries and electric vehicles.
The Model 3 project has been in the works for several years. The
car is expected to debut with a price tag under $40,000 and achieve
far more than 200 miles on a charge, and will compete most directly
with General Motors Co.'s Chevrolet Bolt.
Tesla's current products -- the Model X and Model S -- challenge
Porsche AG, BMW AG and other premium nameplates.
Write to John D. Stoll at john.stoll@wsj.com
(END) Dow Jones Newswires
March 16, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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