Published: Sun, May 05, 2019
Markets | By Otis Pena

Elon Musk owes $507 million to banks helping Tesla raise capital

Elon Musk owes $507 million to banks helping Tesla raise capital

Tesla is aiming to raise up to $2.3 billion in newly announced offerings of stock and convertible notes, just a week after CEO Elon Musk told analysts that the timing was right for raising fresh capital.

Tesla expects capital expenditures of $2 billion to $2.5 billion this year and about $2.5 billion to $3 billion annually for the next two fiscal years.

Shares of Tesla (NASDAQ:TSLA) are up 4.4% in premarket action as they hold on to their gains following news of a $2B capital raise through stock ($650M) and senior notes ($1.35B).

Analysts have been predicting for months that Tesla would need to raise funds for its expansion plans, which include the construction of a factory in Shanghai, the upcoming Model Y SUV, and other projects. The cost to insure $10 million of Tesla bonds against a default for five years went down from $1.7 million to $1.5 million upfront.

The company anticipates gross proceeds of about $2.3 billion, before discounts and expenses. Also, the underwriters were given a 30-day option to buy an additional 15% of each of its new offerings, which would allow Tesla to raise about $2.3 billion in total if these additional securities are fully exercised. It also reported a $702 million loss in the quarter. Management didn't report the interest rate or the conversion rate to common stock. Elon Musk's most despised group of investors are ratcheting up their bets against Tesla ahead of the corporation's earnings.

Qualcomm gets $4.5bn from Apple as revenues rise
The sum was previously undisclosed when the firms announced their settlement in mid-April this year. Both the companies had been locked in an unpleasant patent dispute since the last few years .


Most of the offering will come in the form of convertible bonds due 2024, per the filing.

Goldman and Citigroup, both involved in the fundraising, have "sell" ratings on Tesla's stock. Additional book-runners in the underwriting syndicate are Merrill Lynch, Deutsche Bank, Morgan Stanley and Credit Suisse.

"The fact that Musk could increase its share from $10 million to $25 million is in line with the usual marketing scheme", said Nord LB analyst Frank Schwope. (JB) Straubel-JB is Tesla's second in command behind Musk-indicated that he sold off 20,000 shares of Tesla's stock on April 26 of this year. Tesla's previous prospectus in 2017 showed Musk had $624 million in personal loans from banks, backed by his shares.

As Tesla Inc continues to burn through its cash reserves, the electric automaker is under pressure from Wall Street to raise funds and that's exactly what it is doing.

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