Tesla of­fers $2B in added shares, dis­closes SEC sub­poena

An­nual re­port shows car­maker’s rev­enue fell in U.S., rose world­wide

Richmond Times-Dispatch - - BUSINESS - BY TOM KRISHER

Tesla said it is 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 said the com­pany had enough cash to fund its cap­i­tal pro­grams and it didn’t need to raise any more money.

In a pre­pared state­ment, Tesla said Musk will buy $10 mil­lion worth of the stock while 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 on 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. It was trad­ing at $795.49 Thurs­day.

On the com­pany’s fourthquar­ter earn­ings con­fer­ence call on 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,” he 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 on Thurs­day in its an­nual re­port that the SEC sub­poe­naed in­for­ma­tion in De­cem­ber about the com­pany’s fi­nanc­ing ar­range­ments but gave no fur­ther de­tails. Tesla also 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.

The SEC probe into state­ments about tak­ing the com­pany pri­vate was closed with a $40 mil­lion set­tle­ment, Tesla said. The se­cu­ri­ties agency also closed its probe last year into pro­jec­tions of Model 3 pro­duc­tion rates, the an­nual re­port stated.

“To our knowl­edge no gov­ern­ment agency in any on­go­ing in­ves­ti­ga­tion has con­cluded that any wrong­do­ing oc­curred,” the fil­ing said.

Also in the an­nual re­port, Tesla dis­closed that its U.S. rev­enue fell 15% last year to $12.65 bil­lion, de­spite record ve­hi­cle sales. The U.S. is by far its largest mar­ket. But over­all rev­enue rose nearly 15% to $24.58 bil­lion on in­creases in China, the Nether­lands and Nor­way.

The com­pany said that at the end of last year it had 48,016 em­ploy­ees, 801 fewer than in 2018.

Tesla lost $862 mil­lion last year and has never posted an an­nual profit. But it made $105 mil­lion in the fourth quar­ter.

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