Tesla — with a significant chunk contributed by Elon Musk — is selling around $2 billion worth of stock in an equity offering in order to accelerate production of the Model 3, according to a regulatory filing filed today.
The company is selling 6.8 million shares in the stock offering, which at its current price of around $205 amounts to roughly $1.4 billion. Musk is selling around 2.8 million shares — or close to $600 million — as part of the offering to satisfy taxes on options he is exercising. Even after the sale, the number of shares of common stock held by Musk will increase, the company said.
The net proceeds of the sale are going toward Tesla’s ambitious goal of producing 500,000 cars annually by 2018. The company originally expected to hit that number by 2020, but bumped up that goal in conjunction with its new earnings report based on the high volume of pre-orders for the new Model 3. With so many pre-orders coming in — the company said it has 325,000 reservations for the Model 3 — it’s not a surprise that the company wants to ensure that it’s able to fulfill that production.
Ironically, Goldman Sachs is underwriting the offering, and just hours earlier the firm upgraded the stock to a “buy” rating, signaling that Goldman Sachs felt the stock was undervalued and worth purchasing. Stocks tend to move on these new ratings issued by banks, and Tesla shares were up 3 percent on the day.
As part of its earnings report, Tesla also said it still plans to deliver 80,000 to 90,000 new vehicles this year. The earnings followed a bit of a mixed few months for Tesla, which unveiled the Model 3 — a $35,000 electric car — earlier this year. It’s one of Tesla’s most important launches, and critical for the company’s success, so it seems like the company wants to ensure it has the capital to meet the demand it’s seeing for the car.
Shares of Tesla dipped slightly on the news, though the stock has certainly had a rocky year. Bloomberg recently reported that two top execs were leaving the company ahead of mass production of the Model 3, which sent the stock down around 4 percent. Net net, however, shares of Tesla are pretty flat.
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There’s a small footnote in the filing that also indicates the company may “use a portion of the net proceeds from this offering for working capital or other general corporate purposes.”