Tesla Motors Inc. has announced plans to sell $2 billion in shares of its common stock to help fund for an incoming rush in expenses brought about by the upcoming production of the Model 3. Of that amount, $1.4 billion in stock shares will be used to fund the production of the Model 3 with the remaining shares sale being used to cover tax obligations on stock options that CEO Elon Musk is exercising.
A total of 6.8 million shares are expected to offered, although that amount could balloon to 8.24 million shares if the underwriters, led by Goldman Sachs and Morgan Stanley, exercise an option to buy additional stock from the automaker. For his part, Musk is looking to sell 2.78 million shares.
The decision to sell these shares was expected and it was only a matter of “when” Tesla would do it as opposed to “if” it’s going to do it. Turns out, the California-based electric car maker opted to strike early in anticipation of the launch of the Model 3 sedan. Tesla’s newest model is already a hit despite the fact that the car has yet to go on sale. According to Tesla, it already has 373,000 pre-orders for the car, a number that exceeded even the company’s own expectations. That amount already strikes off 8,000 orders that have been cancelled and 4,200 reservations that were determined to be duplicate orders from eager customers.
The incredible interest behind the Model 3 has already prompted Tesla to accelerate its 500,000-unit build target to 2018, two years earlier than its previous goal of 2020. But that accelerated plan also comes with accelerated spending, and Tesla is gearing up for that with the shares sale. It’s not just the production of the Model 3 that Tesla is thinking about. Related to that is the ramping up of its battery factory in Reno, Nevada to help accommodate the rush of production models it plans to built. The company also said that part of the spending will be used in expanding sales and service globally and adding more charging stations for use by customers.
Not surprisingly, news of Tesla’s impending shares sale saw the company’s stock close at $211.17 on Wednesday, May 18, 2016. As of 10 am ET, the company’s stock price sits at $212.21.
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