Electric-car maker Tesla on Thursday, May 2 revealed it would look to raise $2 billion from the sale of stock and debt. The plans come hot on the heels of the company’s larger-than-expected Q1 estimates ended with a loss.
Following the plans, Tesla’s stock rose 2 percent to briefly reach $328.65 in morning trading in New York. The car maker’s bonds also advanced. The jump in stock was remarkable, notably because it had tumbled by more than 30 percent since the beginning of 2019.
Tesla’s cash balances have reportedly dwindled to record lows after a massive drop in vehicle deliveries and a monstrous debt payment. Tesla CEO Elon Musk is said to be among those to participate in offering with an expected purchase of stock worth about $10 million.
The company’s filing shows that the majority of the cash is expected to come from convertible bonds that are due in 2024.
As per the filing, Tesla will sell up to 2.72 million shares worth about $650 million. The bulk of the cash will, however, come in form of convertible notes, pegged at $1.35 billion.
Sources say that the securities have a coupon range of between 1.5 percent and 2 percent, with the conversion premium set at between 27.5 percent and 32.5 percent.
It’s not immediately clear what volume of shares some of the major banks have targeted. However, according to Tesla, the offering should net about $2.3 billion should the selected underwriters purchase additional securities as expected.
The company has reportedly enlisted Citigroup, Goldman Sachs, Bank of America, Morgan Stanley, Wells Fargo, Deutsche Bank AG, Credit Suisse Group AG, and Societe Generale SA as the share offering’s underwriters.
According to Trace, Tesla’s 5.3 percent bonds due in 2025 rose nearly 2 cents on Thursday morning to reach 87.5 cents- one of the best among those in U.S.’ high-yield market.
Following its reported losses in the earnings per share results, Musk rallied investors during the April 24 earnings call. He assured investors that the company could be profitable again in Q3, with potential capital raising strategies expected.