Just a few days ago, during the Tesla Q2 earnings call with investors, an analyst asked whether the company would need to raise additional money soon. Here’s what the answer he got:
Deepak Ahuja, Chief Financial Officer: “Yeah, we are comfortable with the cash levels. I’ll put it that way.”
Elon Reeve Musk, Chairman & Chief Executive Officer: “I don’t think that there’s not a need to raise equity capital. There may be some value in doing so as a risk reduction measure, but to be clear, we — what Deepak is saying is that even in the absence of any additional capital generation activity, we would have on the order of $1 billion through — basically that would be, our minimum cash position.”
Now, just a short time later, the company announced a new Tesla stock offering that will raise $500 million. Here’s part of the official press release:
Tesla announced 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.
Is it permitted to ask a question here? How can the chief financial officer of a company say, “We are comfortable with the cash levels,” when the company is already planning a new stock offering? Such things don’t happen overnight or at the 19th hole of some trendy country club. They take months of planning with lots of meetings with lawyers and accountants. It doesn’t happen with a phone call.
The new stock will dilute outstanding shares by about 2% according to Seeking Alpha. However, investors are seemingly pleased with the announcement. They bid up the price of the company stock ~2% in early trading on the news.
For much more discussion about the matter, check out this Tesla Motors Club forum thread.
Chart via Seeking Alpha