Tesla Enters Confessional Booth With $2 Billion Capital Raise

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It’s hard to imagine being considered a controversial and visionary chief executive officer simultaneously. It’s also hard to imagine that the same CEO would claim on multiple occasions that his company did not need to raise money, but then after a weak quarter he hints that maybe it would be a good time to raise capital, and then actually raises capital in a just a few market trading days. It’s even harder to imagine that investors would reward the company.

It seems that Elon Musk and Tesla Inc. (NASDAQ: TSLA) just are not your normal case.

Tesla has announced simultaneous offerings of $650 million of common stock and $1.35 billion in convertible senior notes in public offerings. It also has granted the underwriters a 30-day option to purchase up to an additional 15% of each offering. If the green-shoe options are exercised, then Tesla’s total capital raised would be approximately $2.3 billion, before discounts and expenses.

Musk is also said to be participating in the deal by purchasing $10 million of common stock. Tesla’s press release and SEC filings indicated that the company plans to use the net proceeds from these offerings to further strengthen its balance sheet and for general corporate purposes.

As far as the convertible notes, they are said to be due in 2024, with conversion terms as follows:

The notes in this offering will be convertible into cash and/or shares of Tesla’s common stock at Tesla’s election. The interest rate, conversion price and other terms of the notes are to be determined. With respect to the notes, Tesla intends to enter into convertible note hedge transactions and warrant transactions to limit dilution of its common stock. In connection with establishing their initial hedge of the convertible note hedge and warrant transactions, the hedge counterparties or their affiliates expect to enter into various derivative transactions with respect to Tesla’s common stock concurrently with or shortly after the pricing of the notes, including with certain investors in the notes.

More specifics on conversion terms will be shown once the deal prices.

Goldman Sachs and Citigroup are the lead joint book-running managers for the offering. Additional book-runners in the underwriting syndicate are Merrill Lynch, Deutsche Bank, Morgan Stanley and Credit Suisse. Societe Generale and Wells Fargo are also listed as co-managers in the deal.

After closing down almost 2% at $234.01 with a $40.6 billion market cap, Tesla shares were indicated up 5% at $245.80 early Thursday, against a 52-week trading range of $231.13 to $387.46.


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