Tesla Boosts Capital Raise To $2.7bn


Last Friday, Tesla Inc was set to raise up to $2.7 billion (£2.08 billion) in a record-setting capital raising for the electric carmaker, as the investors scooped up a mix of new stock and convertible notes that will recharge the cash-depleted balance sheet of the company.

In a filing, the company disclosed that it had raised its offer to 3.1 million shares, increasing to 3.5 million including a tranche for underwriting banks, from an initially planned 2.7 million that is priced at $243 per share.

The filing also revealed that it would place convertible debt that is worth $1.6 billion, an increase from an initial planned $1.35 billion. That all pointed to buoyant interest in the offering and shares in the firm rose by 2.5 percent in morning trading.

However, the coupon for the debt offering was set at 2.0 percent – the top of the indicated range – implying that the company had ceded ground to investors to borrow so much.

The conversion premium at which the bonds can be exchanged for stock in the future was also at the bottom of the initial range that was given by the firm – another concession.

A senior analyst at global financial markets platform Investing.com, Clement Thibault, stated: “Seeing the offering amount raised does not surprise me at all,”

He added: “As far as Tesla is concerned, the more money in the bank, the better.”

Last Thursday, the launch of a capital raise of Tesla was greeted with relief by Wall Street after a tumultuous year which has seen investors and analysts cast doubt on its ability to produce, sell and deliver enough cars to earn a sustainable profit.

The firm faces expensive challenges, including overhauling its U.S. retail and service operations, developing new models, such as the high-volume Model Y SUV and a Semi commercial truck, and launching production in China.

Many analysts had calculated that without new cash, Tesla – which burned through $1.5 billion in the first quarter and has seen lower demand for its cars – would not be able to carry out its plans.

The firm said that after all costs had been deducted it could now get up to $2.7 billion in new capital from the offer. That compared to the $2.2 billion in cash reserves that the firm held at the end of March.