China's Tencent Buys 5% Stake in Tesla -- 2nd Update
March 28 2017 - 8:45AM
Dow Jones News
By Anne Steele
Tencent Holdings Ltd. has taken a 5% stake in Tesla Inc., making
the biggest company in China one of the largest owners of Elon
Musk's cash-hungry electric car maker.
The internet giant paid about $1.8 billion to take the passive
stake in Tesla this month, according to a filing, amid Mr. Musk's
recent push to raise money. The move puts Tencent among the biggest
owners of Tesla's shares, according to the latest publicly
available data.
"Tesla is a global pioneer at the forefront of new
technologies," a Tencent spokesperson said Tuesday. "Tencent's
success is partly due to our record of backing entrepreneurs with
capital; Elon Musk is the archetype for entrepreneurship, combining
vision, ambition, and execution."
Representatives from Tesla weren't immediately available to
comment.
Tesla shares, which have risen 26% so far this year, climbed
1.6% premarket to $274.60.
Earlier this month, Tesla made moves to strengthen its fragile
balance sheet amid a risky ramp-up of Model 3 production. At the
time, it said it was offering $250 million in common stock and $750
in convertible notes.
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.
But the cost to ramp up production for Tesla -- a perennial
money loser and deeply indebted -- has been high, and the company
needs a cushion to move ahead in the capital-intensive auto
industry. The company has more than $2 billion of debt due in 2018
-- a year during which it aims to sell significantly more vehicles
than last year. It also plans to continue investing heavily in
overhead and product creation in coming years.
Tesla recently closed its $2.6 billion acquisition of SolarCity,
combining Mr. Musk's electric-car and solar-energy companies, and
dropped "Motors" from its name as it repositions itself as a
clean-energy company.
Tencent has been on a tear of late, with shares surging more
than 40% over the past year, thrusting it ahead of e-commerce giant
Alibaba Group Holding Ltd. and Industrial and Commercial Bank of
China, the world's biggest bank by assets. Tencent owns China's
largest social network, WeChat, which has 889 million monthly
active users.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
March 28, 2017 08:30 ET (12:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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