SAN FRANCISCO (Bloomberg) -- Tesla Motors Inc. may raise billions of dollars by selling stock to accelerate production plans, betting the benefits will be enough to outweigh the dilution of the share price.
When CEO Elon Musk pulled ahead the electric-car company’s target to increase vehicle assembly to 500,000 a year to 2018 from 2020, he added that capital spending will increase by about 50 percent -- $750 million -- from the original budget for this year, which would probably require some fundraising.
The smallest and youngest publicly held U.S. automaker faces huge capital expenditures as it ramps up its massive battery factory toward full production, adds tooling for a third model, expands sales and service operations globally, installs more superchargers, seeks to hire additional manufacturing experts and contemplates adding more vehicle-assembly capacity.
Analyst Brian Johnson of Barclays projected a $3 billion equity raise sometime in the second quarter. At current stock prices, a transaction of that size would be about 14.5 million shares, an increase of 11 percent to the number of shares outstanding.
“With its ambitious plans that will require an incremental fundraising, we view Tesla as more of a cash-hungry startup unicorn than a traditional public company,” wrote Johnson in a research note. “With Tesla likely to come to the market for a capital raise near-term, it’s worth asking whether it deserves an up round or a down round.”
This would be Tesla’s sixth capital raise in the last four years, following a lull after its June 2010 initial public offering, when it raised $226 million in the first IPO for a U.S. automaker in a half century. The other five:
- October 2012 -- Tesla raised $222 million selling shares for $28.25 apiece.
- May 2013 -- the company raised $1.08 billion in equity and debt offerings, a move that allowed it to repay its $465 million Energy Department loan nine years ahead of schedule.
- February 2014 -- Tesla borrowed $2.3 billion more in convertible debt to help finance the gigafactory under construction east of Reno, Nevada.
- June 2015 -- Tesla obtained a credit line of as much as $750 million.
- August 2015 -- Tesla sold 3.1 million shares, raising $738 million.
Musk has often invested in the new offerings, and he remains by far the largest shareholder with a 22 percent stake.