Elon Musk readies for Tesla’s Model 3 rollout

New vehicle is key as billionaire tries to reach mainstream consumers.

Elon Musk needs to raise at least $1.15 billion more to bring his more affordable Model 3 to market. His believers, along with investors who buy into the vision of Tesla Inc., could hardly be happier.

After burning through cash late last year and Musk’s warning to Wall Street that company coffers were “close to the edge,” Tesla announced Wednesday that it would sell new stock and convertible securities while preparing for volume production and deliveries of its first mass-market car later this year.

News of a big stock sale typically depresses a company’s share price because it dilutes the value of investors’ holdings. But this is Musk, whose clean-energy company has captured imaginations on and off Wall Street even as Palo Alto, California-based Tesla has struggled to be profitable. Instead of falling after the capital raise announcement, Tesla stock is on the rise.

The proceeds from Tesla’s offering of $250 million in shares and $750 million in convertible debt will be used to strengthen its balance sheet and reduce risks associated with introducing the Model 3 sedan, Tesla said in a statement. The Model 3, scheduled to start production in July, will start at about $35,000 before incentives and is smaller than the Model S.

The offering will cushion the balance sheet of the youngest publicly held U.S. automaker as it ramps up spending to introduce the Model 3. Tesla burned through $970 million in the fourth quarter and expects as much as $2.5 billion in expenditures during the first half of 2017. If anything, the size of the capital raise is smaller than many analysts had expected.

The Model 3 is the key to Musk’s push to reach mainstream consumers. At last count, Tesla had roughly 373,000 reservations for the vehicle. The company’s $41 billion market value makes it almost as big as Nissan Motor Co. and not far off from Ford Motor Co., rival automakers that sell millions of cars a year.

Tesla expects to deliver as many as 50,000 vehicles in the first half of this year, before ramping up Model 3 production to more than 5,000 a week in the fourth quarter.