Tesla Motors Announces Plan to Raise US$1.6 Billion
Bulk of the Money goes into building a ‘gigafactory’
In late February, Tesla Motors announced that it will be raising US$1.6 billion in debt to finance the expansion of its electric car business, develop its upcoming mass market vehicle and build the company’s battery plant.
The plans for the new battery plant, called the Gigafactory, was released separately on Tesla’s company blog, saying that the new factory will be able to produce more Lithium-ion batteries in 2020 than last year’s total global output. The plant will also address one of the company’s challenges, a supply crunch for car batteries that contains the company’s ability to meet the demand for its vehicles. The factory should also bring down production costs.
Tesla will be offering US$800 million in convertible senior notes due 2019 and another US$ 800 million in convertible senior notes due 2021. Additionally, the company plans to give the underwriters a 30-day option to purchase additional notes worth US$240 million, which would push the total to US$1.84 billion. Some of the raised funds will go towards general corporate purposes. The notes will also be convertible into cash, common stock or some combination thereof, generally at Tesla’s discretion.
Analysts have been keen to hear more about Tesla’s plans for the Gigafactory, as it removes a curb on production and helps diversify the business, as becoming a majority partner in the world’s largest Lithium-ion battery plant opens up many new business opportunities. Such opportunities include grid storage, military operations and unmanned aerial vehicles, wrote Dougherty & Co. analyst Andre James in a research report.