Tesla offers $2B in added shares, discloses subpoena
Tesla announced that it’s selling $2 billion worth of additional stock, that its U.S. revenue fell last year and that securities regulators are scrutinizing its finances.
All of the developments Thursday were disclosed in filings with the U.S. Securities and Exchange Commission, which in December subpoenaed financial data and contracts, including the company’s financing arrangements.
The Palo Alto, Calif.-based company’s shares jumped 3.7% despite the disclosures and the additional 2.65 million shares that could dilute the value of the 180 million shares now on the market.
The surprise sale taps into Tesla’s rocketing stock price over the past eight months, but comes just two weeks after CEO
Elon Musk boldly announced that the company had enough cash to fund its capital programs and didn’t need to raise more money.
In a news release, Tesla announced that Musk will buy $10 million worth of the stock, and billionaire board member and Oracle co-founder Larry Ellison will buy shares worth $1 million.
The electric car and solar panel maker will use the proceeds to strengthen its balance sheet and for general corporate purposes.
In the Thursday filing, Tesla Inc. said underwriters of the share sale have a 30-day option to buy another $300 million in common stock. The company estimated that the net proceeds from the sale would be $2.31 billion if the underwriters exercise the options.
The numbers assume that the shares would be sold for $767.29 each, the closing price of the stock Wednesday. Each additional dollar on the share price would add about $2.6 million to the proceeds, the filing said.
Since June of last year the stock has more than quadrupled in value and was trading at $795.49 on Thursday.
During the company’s fourthquarter earnings conference call Jan. 29, Musk was asked about raising capital since the stock had gone up so dramatically. He replied that the company was spending money as fast as it could spend sensibly, yet it’s still generating cash.
“So in light of that, it doesn’t make sense to raise money, because we expect to generate cash despite this growth level,” Musk told analysts.
In a note to investors, Wedbush analyst Daniel Ives called the stock sale a smart move because the shares are in a strong position as electric vehicle demand is starting to reach an inflection point, with China as the main driver.
He also wrote that the sale removes a potential cash shortage down the road.
“The bulls (which we agree with) will say this essentially rips the Band-Aid off and takes the doomsday cash crunch scenario some predicted down the road now off the table,” Ives wrote.
Tesla also disclosed Thursday in its annual report that the SEC subpoenaed information in December about the company’s financing arrangements, but gave no further details.
Tesla said the U.S. Justice Department has asked for information about Musk’s statements that he had funding secured to take the company private, and about production rates for the Model 3 sedan. The funding had not been lined up.