Tesla Motors Inc (NASDAQ:TSLA) has announced that they plan to sell around $2 billion worth of shares to help finance the Tesla Model 3 production which is expected next year in September. The money will also be used to try and cover tax obligations by the company according to the Chief Executive Officer Elon Musk.
The California-based manufacturer plans to put up $1.4 billion worth of stock on the market to help it finance the Model 3 car which is deemed to be the most important car by the company at the moment by analysts. The company’s plans indicate that they plan to build up to half a million electric cars by 2018 which will definitely require some heavy funding.
Tesla Motors Inc (NASDAQ:TSLA) might use the proceeds from the funding for use in the corporate sector or use it as an alternative for working capital, the company also announced. After calculating fees and everything the company expects to raise about $1.7 billion in funds from the sale.
Mr. Musk will also put up some of his stock to cover the tax obligations of the company. He is expected to sell 5.5 million of stock options, and he won’t receive any cash from this sale.
Tesla shares rose by approximately 1 percent after the news and rose to $211.17 gaining by $6.51 after the Tesla had broken the news at 4 pm in the afternoon.
The rise in share price since 2009, is the one that makes Mr. Musk wanton to paying taxes on his stock-options. He has paid $36.5 million for the 5,503,972 options that he currently has. His stock options are worth $1.16 billion if measured up to Wednesday’s closing price. A filing that was disclosed to the public, Musk used a loan from the bank, Morgan Stanley, to purchase the stock options. The loan is held against his holdings which are in the Tesla company. After buying the shares, Musk owes Morgan Stanley about $299 million.
Reports from the electric car manufacturer also indicate that Mr. Musk plans to donate about 1.2 million shares to charity. This would be $253 million in worth if calculated against the Wednesday closing price. Despite selling some of his shares, the options exercise will see him increase his hold on Tesla Motors.
The new Tesla Model 3 car is believed to be the one that will break barriers for the electric car firm. They currently have about 400,000 orders for the car which is placed at $35,000 making it accessible for the average person in the US. The car is far cheaper than it’s predecessors the Model X and the Model S car. It can seat five passengers and can travel 215 miles on one electric charge.
Some analysts have said the company cannot make 500,000 units by 2018 as planned because they will encounter many production complexities.
The company recently tapped a credit line which enabled them to end the first quarter with $1.4 billion revenue. It also announced that their capital spending was expected to increase by 50 percent. But with the $2 billion they are expected to get from the sale, it will be a good enough cushion as they enter this stage of the company’s history.
The company has only had one fruitful quarter since going public, and they continue to have losses as they continually invest in their growth.