Elon Musk heads to Wall Street seeking up to $2.3 billion in new capital for Tesla via ReutersTV $TSLA
- Tesla Inc will raise up to $2.3 billion in new capital, renouncing what Elon Musk called a “Spartan diet” and easing Wall Street concerns about the money-losing company’s ability to overcome a drop in sales and build new product lines.
Shares of Tesla rose 4.3% to close at $244.10, while the yield on Tesla’s existing $1.8 billion junk bond fell to its lowest level in over a month. For over a year, Musk had insisted that the money-losing Silicon Valley automaker had no need for a capital raise, saying that high Model 3 volume and efficiency would push the company to profit in all quarters of 2019. That changed with a $702 million loss in the first quarter, and warnings that profit would be delayed until the latter half of the year.
Musk also has been distracted by a public feud with U.S. regulators. Shares in the company have dropped 28% since the beginning of the year.Tesla ended its first quarter with $2.2 billion in cash. In 2019, it expects capital expenditures of $2 billion to $2.5 billion and about $2.5 billion to $3 billion annually for 2020 and 2021.
The convert is being marketed with a higher conversion premium than its last convertible bond, issued in March 2017, meaning Tesla shares will have to rise by an even larger magnitude to trigger a conversion to equity.
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