Instead of taking on debt, Tesla could have issued new stock, which might have been the
most efficient money-raising tool, since shares are worth 55% more today than they were a year ago.
Issuing stock would ask shareholders to give up a little bit of their ownership because Tesla would be divided into more shares. Shareholders don’t like to be “diluted” in that fashion. Still, a stock offering would take advantage of Tesla’s greatest asset right now -- its stock. And Tesla has taken that path before. In May 2016, for instance, Tesla raised $1.4 billion through a stock offering priced at $215. Tesla shares are now worth $355.
In a press release on Monday, the company said it plans to use the latest proceeds “to further strengthen its balance sheet during this period of rapid scaling with the launch of Model 3, and for general corporate purposes.”
Tesla has yet to announce specific terms for the offering, including what interest rate it will pay on the debt.
There’s no doubt that Tesla is in the midst of a rapid expansion, with the launch of its mass-market Model 3 car. The company has promised it will produce 500,000 cars by next year, a huge jump for the company which made just 84,000 cars in 2016. Upon delivering the first Model 3 cars last month, CEO Elon Musk said the company was about to enter a “production hell.”
The production leap will be costly, which is a big part of the reason why some investors remain so skeptical of Tesla’s stock, even as it continues to soar.
