Tesla just cannot deny it – the company needs more money. After a first quarter that proved to be weak, it was found out that the automaker burned nearly $1 billion. As such, it is looking for ways to raise at least $2 billion from its investors, according to CNBC.
The electric-car company is planning to offer its investors around 2.72 million shares of stock, which is said to be enough in reaching around $650 million. As for the reported $1.35 billion of debt securities, Elon Mush plans to convert all of them into stock, although no certain date has been announced just yet. However, this has already been part of a regulatory filing.
It is possible for this move from Tesla to acquire as much as $2.3 billion. This is most especially the case if demand becomes great enough for the banking institutions underwriting it to sell more stocks and bonds.
The move from the electric vehicle company, however, is not something knew. In fact, analysts from Wall Street are expecting the possibility. This is simply due to the company’s history, which has proven to have showcased a haphazard progress. As a result, it is only expected from the firm to decide a return to the public market in an attempt to gain fresh capital.
Interestingly, though, this move is deemed to be the first time in two years that company has decided to turn to equity markets when it comes to capital. Also, it is considered to be the biggest issue concerning new shares since it managed to obtain at least $2.3 billion back in 2016.
Right after Tesla’s very own initial public offered in 2010, it decided to sell shares and even convertible securities on an annual basis. This is something the company did until 2017. As a result, it was successful enough in gathering nearly $8 billion.
It is worth noting that the idea of selling new shares can sometimes depress the stock price of a company. But as far as Tesla’s stock is concerned, it registered around 4.3 percent following its decision to raise capital from public markets. This is definitely a good sign, suggesting that a handful of investors out there are confident about the company’s ability to progress. This also means that there are investors out there who believe in Tesla and what it is aiming to do. And since they are confident the company can reach its ambitious goal, it only makes sense for them to help it finance those dreams.
This decision is definitely an important one for the car manufacturer, something that many experts believe. The fact that it is able to raise the capital even at a very low cost is already an achievement. There is a huge thing in Tesla having shares that can be traded a high valuation. Basically, by doing so, the company is more than capable of paying little when issuing new shares. The company announced that Musk, its very own CEO, would likely buy new shares by spending at least $10 million.
Musk has denied the idea of raising capital. In fact, he has been very vocal about it ever since. But following the results from the company’s first-quarter performance, the executive started to think otherwise. He added that there is merit to raising capital right now.
Apparently, there is a need for Tesla to sell more shares in order to raise the much-needed money. This would have made financial sense, however, had the company decided to do so when its stock price was still a lot higher than now.