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Tesla offers £1.5bn of additional shares

Tesla said Elon Musk will buy 10 million dollars worth of stock and billionaire board member Larry Ellison will buy shares worth one million dollars.

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Since June last year, the stock has more than quadrupled in value (David Zalubowski/AP)

Since June last year, the stock has more than quadrupled in value (David Zalubowski/AP)

Since June last year, the stock has more than quadrupled in value (David Zalubowski/AP)

Tesla has said it is selling two billion dollars (£1.5 billion) worth of additional stock, that its US revenue fell last year and that securities regulators are scrutinising its finances.

All of the developments were disclosed in filings with the US Securities and Exchange Commission (SEC), which in December subpoenaed financial data and contracts, including the company’s financing arrangements.

The California-based company’s shares jumped 3.7% despite the disclosures and the additional 2.65 million shares that could dilute the value of the 180 million shares now on the market.

The surprise sale taps into Tesla’s rocketing stock price over the past eight months, but comes just two weeks after chief executive Elon Musk said the company had enough cash to fund its capital programmes and it did not need to raise any more money.

Elon Musk
Elon Musk (John Raoux/AP)

In a prepared statement, Tesla said Mr Musk will buy 10 million dollars (£7.6 million) worth of the stock while billionaire board member and Oracle co-founder Larry Ellison will buy shares worth one million dollars (£766,000).

The electric car and solar panel maker will use the proceeds to strengthen its balance sheet and for general corporate purposes.

In the Thursday filing, Tesla said underwriters of the share sale have a 30-day option to buy another 300 million dollars (£230 million) in common stock.

The company estimated that the net proceeds from the sale would be 2.31 billion dollars (£1.77 billion) if the underwriters exercise the options.

The numbers assume that the shares would be sold for 767.29 dollars (£587.84) each, the closing price of the stock on Wednesday.

Each additional dollar on the share price would add about 2.6 million dollars (£2 million) to the proceeds, the filing said.

Since June last year, the stock has more than quadrupled in value and was trading at 795.49 dollars (£575.10) on Thursday.

On the company’s fourth-quarter earnings conference call on January 29, Mr Musk was asked about raising capital since the stock had gone up so dramatically.

He replied that the company was spending money as fast as it could spend sensibly, yet it is still generating cash.

“So in light of that, it doesn’t make sense to raise money because we expect to generate cash despite this growth level,” he told analysts.

In a note to investors, Wedbush analyst Daniel Ives called the stock sale a smart move because the shares are in a strong position as electric vehicle demand is starting to reach an inflection point, with China as the main driver.

The bulls (which we agree with) will say this essentially rips the Band-Aid off and takes the doomsday cash crunch scenario some predicted down the road now off the tableDaniel Ives, analyst

He also wrote that the sale removes a potential cash shortage down the road.

“The bulls (which we agree with) will say this essentially rips the Band-Aid off and takes the doomsday cash crunch scenario some predicted down the road now off the table,” Mr Ives wrote.

Tesla also disclosed on Thursday in its annual report that the SEC subpoenaed information in December about the company’s financing arrangements but gave no further details.

The firm also said the US Justice Department has asked for information about Mr Musk’s statements that he had funding secured to take the company private, and about production rates for the Model 3 vehicle.

The funding had not been lined up.

The SEC probe into statements about taking the company private was closed with a 40 million dollar (£30.6 million) settlement, Tesla said.

The securities agency also closed its probe last year into projections of Model 3 production rates, the annual report stated.

“To our knowledge, no government agency in any ongoing investigation has concluded that any wrongdoing occurred,” the filing said.

Also in the annual report, Tesla disclosed that its US revenue fell 15% last year to 12.65 billion dollars (£9.68 billion), despite record vehicle sales.

The US is by far its largest market.

But overall revenue rose nearly 15% to 24.58 billion dollars (£18.8 billion) on increases in China, the Netherlands and Norway.

The company said that at the end of last year it had 48,016 employees, 801 fewer than in 2018.

Tesla lost 862 million dollars (£660 million) last year and has never posted an annual profit.

But it made 105 million dollars (£80 million) in the fourth quarter.

At the end of last year, it had 6.27 billion dollars (£4.8 billion) in cash and equivalents on hand, almost 70% better than at the close of 2018.

But its debt grew from 9.4 billion dollars (£7.2 billion) at the end of 2018 to 11.6 billion dollars (£8.9 billion) in December of 2019.

PA