Tesla plans to raise $1.08 billion to build cash reserves and repay the loan offered by the Energy Department.
CEO Elon Musk said the automaker will sell 3.9 million shares for $92.24 each. Musk will buy 1.08 million shares for the price of $100 million and convertible notes might increase as much as $648 million. The automaker said $452.4 million will be used to pay back the Advanced Technology Vehicles Manufacturing loan.
“In terms of the overall run-up in the share price, I do think investors are not factoring in fundamental risks around margins and demand, ” said Ben Schuman, an analyst with Pacific Crest Securities, who rates Tesla sector perform. “That said, the big market and likely positive near-term catalysts continue to fuel the run. It’s difficult to tell when — if ever — we could see a correction.”
Ford, Tesla, Nissan and Fisker received loans in 2009 under a program created by President Barack Obama. Unfortunately, the unfavorable situations with Fisker, A123 Systems and solar-panel maker Solyndra have drawn criticism from the Republican party.
Tesla, on the other hand, is far away from the impossibility of repaying the loan, as last week the company reported its first quarterly profit and also recently, Consumer Reports magazine offered Model S sedan an almost perfect score.