In what will hardly come as a surprise, Tesla – which burned half a billion dollars in the fourth quarter – just announced it is raising capital in the form of a $250 million common stock and $750 million convertible offering. In addition, Tesla has granted the underwriters a 30-day option to purchase up to an additional 15% of each offering. Elon Musk will participate by purchasing $25 million of common stock. According to the press release, the aggregate gross proceeds of the offerings, including the options granted to the underwriters, is expected to be approximately $1.15 billion.
Tesla stock is, far more surprisingly, soaring on the dilution news perhaps because instead of raising the entire $1+ billion in the form of equity, TSLA managed to issue parts of it as aconvert.
Goldman, Deutsche, Citigroup and Morgan Stanley are underwriters of the offering.
Full press release below:
Tesla Announces Offerings of Common Stock and Convertible Senior Notes
LO ALTO, CA — (Marketwired) — 03/15/17 — Tesla (NASDAQ: TSLA) today announced offerings of $250 million of common stock and $750 million aggregate principal amount of convertible senior notes due in 2022 in concurrent underwritten registered public offerings. In addition, Tesla has granted the underwriters a 30-day option to purchase up to an additional 15% of each offering. Elon Musk, Tesla’s CEO, will participate by purchasing $25 million of common stock.
The aggregate gross proceeds of the offerings, including the options granted to the underwriters, is expected to be approximately $1.15 billion. Tesla intends to use the net proceeds from the offerings to strengthen its balance sheet and further reduce any risks associated with the rapid scaling of its business due to the launch of Model 3, as well as for general corporate purposes.
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.
Goldman, Sachs & Co., Deutsche Bank Securities, Citigroup and Morgan Stanley are acting as lead joint book-running managers for the offering, with Barclays, BofA Merrill Lynch and Credit Suisse acting as additional book-running managers.
This post originally appeared on Zero Hedge