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Shareholder message: Raise $500M?

Discussion in 'TSLA Investor Discussions' started by wk057, Aug 13, 2015.

  1. wk057

    wk057 Senior Tinkerer

    Feb 23, 2014
    Hickory, NC, USA
    Not sure if this is bogus or not, but the email looks somewhat legit based on headers. Edit: NM, it's on their site also: Tesla Announces $500 Million Common Stock Offering (NASDAQ:TSLA)

    Tesla Announces $500 Million Common Stock Offering
    Proceeds to Accelerate Growth of Business, Including Tesla Energy, and Development of Model 3 and Gigafactory

    PALO ALTO, CA -- (Marketwired) -- 08/13/15 -- Tesla (NASDAQ: TSLA) announced today that it intends to offer, subject to market and other conditions, $500 million of additional shares of common stock in an underwritten registered public offering. In addition, Tesla intends to grant the underwriters a 30-day option to purchase up to $75 million of additional shares of common stock.
    Elon Musk, Tesla's CEO, intends to purchase $20 million of common stock in this offering at the public offering price.
    Tesla intends to use the net proceeds from this offering to accelerate the growth of its business in the United States and internationally, including the growth of its stores, service centers, Supercharger network and the Tesla Energy business, and for the development and production of Model 3, the development of the Tesla Gigafactory, and other general corporate purposes.
    Goldman, Sachs & Co. and Morgan Stanley are acting as lead joint book-running managers for the offering, J.P. Morgan and Deutsche Bank Securities are acting as additional book-running managers for the offering, and BofA Merrill Lynch and Wells Fargo Securities are acting as co-managers.
    An effective registration statement relating to the securities was filed with the Securities and Exchange Commission on May 15, 2013. The offering of these securities will be made only by means of a prospectus supplement and the accompanying prospectus. Copies of the preliminary prospectus supplement and the accompanying prospectus may be obtained from Goldman, Sachs & Co., Attn: Prospectus Department, 200 West Street, New York, NY 10282-2198, telephone: (866) 471-2526, facsimile: (212) 902-9316 or email: [email protected]; from Morgan Stanley & Co. LLC, Attn: Prospectus Department, 180 Varick Street, Second Floor, New York, NY 10014; from J.P. Morgan Securities LLC, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, telephone (866) 803-9204; or from Deutsche Bank Securities Inc., Attn: Prospectus Group, 60 Wall Street, New York, NY 10005-2386, telephone: (800) 503-4611 or email: [email protected].
    This press release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. The securities being offered have not been approved or disapproved by any regulatory authority, nor has any such authority passed upon the accuracy or adequacy of the registration statement, the prospectus contained therein or the prospectus supplement.
    Forward-Looking Statement
    Certain statements in this press release, including statements regarding the proposed public offering of common stock and Tesla's intended use for the proceeds of the offering, are "forward-looking statements" that are subject to risks and uncertainties. These forward-looking statements are based on management's current expectations, and as a result of certain risks and uncertainties, actual events or results may differ materially from those contained in the forward-looking statements. Please refer to the registration statement on Form S-3 on file with the SEC and the prospectus and prospectus supplement included or incorporated by reference therein, as well as the other documents Tesla files on a consolidated basis from time to time with the SEC, specifically Tesla's most recent Form 10-K and Form 10-Q. These documents contain and identify important factors that could cause the actual results for Tesla on a consolidated basis to differ materially from those contained in Tesla's forward-looking statements. Tesla disclaims any obligation to update information contained in these forward-looking statements.
    Source: Tesla Motors, Inc.
  2. muleferg

    muleferg Member

    Dec 15, 2013
    North Wilkesboro, NC
    Thank's WK.
  3. ev-enthusiast

    ev-enthusiast Active Member

    Sep 10, 2013
    Europe (Germany)
    Thank's for posting WK057.

    What does anybody think about the pro and cons of a secondary offering near an ATH compared to a lower SP?
  4. Perfectlogic

    Perfectlogic Member

    Jul 26, 2014
    Offering a secondary at the highest SP possible is obviously the best as the dilutive effect would be the lowest, but even for Tesla I'm sure calling the top isn't easy and they might not have made the decision to raise capital a month ago either.

    $500M isn't that much, seems positive that they appear to think that the amount is enough to cover the gigafactory and some even goes towards the model 3.
  5. mkspeedr

    mkspeedr Member

    Jun 14, 2015
    Santa Clara, CA
    500 million - sounds like too little. I think they need 3-4 times that amount.
  6. Familial Rhino

    Familial Rhino Endangerous Herbivore

    Feb 27, 2014
    Toronto, ON
    They likely don't raise for expansion purposes, as they think they can fund it from future sales. But nobody can guarantee that the Model X launch will go without a hitch, so they raise just enough to de-risk it. This is why they raise now, since the only reason they would need it is if the launch stumbles, and that would be a bad time to raise. If the launch goes well, the $500M is gravy that can be used to accelerate their overall plan.
  7. evme

    evme Member

    Jul 5, 2013
    This announcement makes no sense to me really, why now and why so little? If they really wanted to do a stock raise they could have delayed lowering of forecasts to Q3 and did a stock raise for much more at a higher price. Since they had a credit line, one would have figured they would have used it until at least the Model 3 unveil. The stock would have jumped then, plus they could have raised far more.

    Don't get me wrong I think them doing a raise of money is a good thing. Just the timing and the amount baffles me completely. Actually, I think this is the first move I have ever seen them make which I can't make sense of. Unless Tesla is planning on something big and needed cash now to make it happen.

    Can anyone make any sense of this?

    Also it seems Musk is buying 20 million shares.
  8. DaveT

    DaveT Searcher of green pastures

    Nov 15, 2012
    San Diego
    My take on it is that they didn't want to raise money now because at $240 the price is kind of low. But their hand was forced because Model X delays are pushing out when Tesla will be cash flow positive thus they are and will be burning more cash than anticipated over the next several months. So they need some extra cushion (over the next several months) and $500m should do it.
  9. drinkerofkoolaid

    drinkerofkoolaid Active Member

    Nov 3, 2012
    #10 drinkerofkoolaid, Aug 13, 2015
    Last edited: Aug 13, 2015
    I think they want to raise capital now for a few reasons.

    1) Demonstrate commitment to success as defined by Tesla, of projects to re-assure partners who are considering either loaning Tesla capital or investing in Tesla.

    2) Re-invigorate investor interest and confidence by allowing new investors to buy shares.

    3) Elon buying shares is a sign he realizes the shares are undervalued.

    4) Safety net to ensure Tesla has enough capital to complete the projects. Model X will be released very soon. Didn't Elon say finalizing orders would begin in 2 weeks about 2 weeks ago?

    5) Model X demand will be very high.
  10. mark

    mark Member

    Sep 8, 2012
    Actually $20 million worth of shares
  11. hershey101

    hershey101 Member

    Jan 22, 2013
    New York, New York, United States
    jhm just posted a very good response to the why now question in the Short term thread.
  12. farzyness

    farzyness Food lover. Entrepreneur. Did I say food lover?

    Aug 8, 2013
    Lehigh Valley PA
    #13 farzyness, Aug 13, 2015
    Last edited: Aug 13, 2015
    Here are my thoughts:

    -As alluded previously by other posters, Tesla is in a cash crunch due to Model X launch. With the potential of not going cash flow positive until Q1, they needed to generate a little bit of a cushion to soften the capex and opex impact due to the ramp. This can possibly explain the timing.

    -Tesla might be working with other companies (note Apple and Googimean Alphabet) for some major, MAJOR rounds of investments for the upcoming gigafactory, model 3, etc. With the rumors of Apple entering the car biz and Google working on their project, it makes a tremendous amount of sense for companies to leverage Tesla's battery, drivetrain, and supercharging tech in exchange for investing in the company. Larry, Sergei, Tim, Ive, and Elon could all be in a room planning this entire thing out as far as we know. This would explain the lower than expected $.

    -If the 2nd point is true, it would make even better sense to do the offering now, and Elon getting a decent amount of those shares, due to the fact that the stock will more than likely take off for the moon if such thing was announced.

    Anyway - my wishful thinking.
  13. neroden

    neroden Happy Model S Owner

    Apr 25, 2011
    Ithaca, NY, USA
    In the spirit of speculating what the purpose of the cash raise is, I will simply point out that the first two things listed in the prospectus as uses for the cash are stores and service centers.

    I have previously commented that Tesla needs to build roughly 60 more service centers in the US alone just to have sufficient geographic coverage before Model 3 is released. Other urban service centers will need to be expanded to larger locations to handle more customers. There are also similar issues in other countries (Australia and Canada, for instance.) Then there's training all those employees. And paying them (increases overhead quite a lot)... but you have to have them all ready *before* Model 3 starts delivery.

    Setting these up could eat up a couple hundred million dollars very quickly.

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