Elon Musk Makes $500 Billion Autonomy Pitch to Investors

Elon Musk Makes $500 Billion Autonomy Pitch to Investors

Tesla said it would seek to raise $650 million in new shares and $1.35 billion in debt with underwriters having the option to buy an additional 15 percent of each offering, potentially raising the proceeds of the deals to $2.3 billion.

"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.

A raise of around $2 billion is in line with what several Tesla analysts were expecting. Articles appear on euronews.com for a limited time. Musk previously owned 20 percent of the company's shares and the present purchase would for 41,896 shares.

"This was a smart move by Musk and Tesla to rip the band-aid off and go to the capital markets as the growing worries around capital was a black cloud over the stock on the heels of the company's troubled March results and the choppy path ahead", he adds.

Selling new shares often depresses a company's stock price, but Tesla's stock ended the day up 4.3%, a sign that some investors still believe the company can achieve its ambitious goals and are willing to finance those dreams. Musk changed his tune after the first quarter, when a record decline in vehicle deliveries and the company's biggest-ever debt payment depleted its cash balance to a three-year low of $2.2 billion. The $1.8 billion junk bond maturing in 2025, which rose 1.8% Thursday to a high of 87 cents on the dollar, was last at 86.5 cents.

Many analysts had calculated that Tesla - which burned through $1.5 billion in the first quarter - would not be able to carry out its growth plans without new cash.

Thursday's announcement comes about two weeks after Tesla announced a wider-than-expected first quarter loss. The Model 3 helped Tesla deliver two strong quarters of profit in the second half of 2018, but then it slipped back into the red last quarter. Citigroup and Goldman Sachs are underwriting Tesla's effort to raise the $2 billion.

"This indicates Tesla can't yet rely on cash from operations to fund its deeper penetration into autonomous-driving technology, advanced chips, insurance, and China".

Tesla boss Elon Musk personally owes $507m (£389m) to the Wall Street banks helping the electric vehicle firm raise up to $2.3bn, it emerged yesterday.

Shares of Tesla Inc. jumped 5 percent before the opening bell. If Tesla's stock falls, the banks could force him to sell some of those shares.

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