Tesla raising $2.3 billion after money-losing first quarter

Tesla Roadster II

After disappointing deliveries and a big loss in the first quarter of this year, Musk suggested last week that "There is some merit to raising capital", and said that the time may be about right to raise capital.

Demand for Tesla's Models S, 3 and X is coming to normal in the second quarter following the company delivered only 63,000 vehicles in January through March, Musk said.

FILE PHOTO: Tesla CEO Elon Musk leaves Manhattan federal court after a hearing on his fraud settlement with the Securities and Exchange Commission (SEC) in New York City, U.S. April 4, 2019.

If all the options are exercised, the gross proceeds would come to about $2.3 billion before discounts and expenses, Tesla said. The company seeks to offer new shares worth $650 million and convertible senior notes worth about $1.35 billion, according to a press release.

The company has made a series of moves to rework pricing strategies for its cars following the reduction of a $7,500 federal tax credit for Tesla buyers by half, a decline that hurt first-quarter deliveries.

Not only major investment firm analyst are also optimistic on Tesla future, Daniel Ives, Wedbush analyst said, Wall Street estimated a much poorer quarter for Tesla and the supplies of the Model 3 were in fact better than anticipated. Still, having only $2.2 billion in the bank is a precarious situation for a company that has been known to lose more than $700 million in a single quarter.

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Bond markets have reflected growing worries about Tesla's prospects in recent months. The company's share price is up three percent over Wednesday's closing price.

"Tesla probably is nearing its" money floor", the quantity it requires in the checking account to pay all of the bills, said Gartner analyst Michael Ramsey. They typically allow a borrower to raise capital at a lower interest rate than an ordinary bond because the investor has the potential for a greater return should the conversion terms be met.

When first announced, shares in the company fell briefly but quickly rose once details of the plan became known.

However, Tesla investors appeared to welcome news of the fundraising yesterday.

Shares of Tesla Inc. closed Thursday up 4.3% at $244.10. The offering was increased from 2.7 million shares.

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