Tesla selling stock, bonds to raise money

Tesla needs more money. A lot of it.

After a surprisingly weak first quarter in which it burned through nearly $1 billion, the company said Thursday that it would seek to raise about $2 billion in the markets.

The Palo Alto electriccar maker plans to offer investors 2.72 million shares of stock, which would raise about $650 million, and $1.35 billion of debt securities that can convert to stock at a later date, according to a regulatory filing. The plan could raise as much as $2.3 billion if demand is great enough for the banks underwriting it to sell additional stock and bonds.

Selling shares often depresses a company’s stock price, but Tesla’s stock was up 4% Thursday, a sign that some investors still believe the company can achieve its ambitious goals.

Tesla said CEO Elon Musk would spend $10 million on new shares.

If Tesla raises $2 billion, it can use the money as a buffer in case its operations continue to stumble and consume large amounts of cash this year.

In recent months, Tesla has not sold enough cars

to cover its operating expenses. Sales of its main product, the Model 3 sedan, tumbled in the first quarter. As a result, the company’s operations used $640 million in cash in the period. In addition, Tesla reported $280 million in capital spending.

The company also paid off a convertible bond in the quarter, using up $920 million of cash. At the end of March, Tesla had $2.2 billion in cash on hand, down from $3.7 billion at end of 2018.

Tesla is expecting Model 3 sales to pick up as it irons out logistical problems that it says have hampered deliveries in Europe and Asia.

But sales are not the only thing that affects Tesla’s cash. The company has plans for new models that include a large truck, the Semi, and an SUV, the Model Y. Tesla is also developing facilities in China. And it is thinking about selling its own insurance, which could also require significant amounts of capital.

Analysts think the plan announced Thursday will probably be adequate to finance the production of Tesla’s current models, but they say the company may be back for more cash as it moves to release new vehicles.