Tesla Stock Surges With Billion Dollar Announcement

Model 3 prototype filmed driving down the road

Model 3 prototype filmed driving down the road

Tesla Inc. announced Wednesday it was going to the market to raise about $1.15 billion in fresh capital, ahead of the company's upcoming launch of the Model 3, its "mass-market" sedan expected to hit the roads in the second half of 2017.

Tesla has several billion in previously issued convertible debt coming due in the next few years, but the $750 million it will sell this time around doesn't mature until 2022.

The company's shares were up 2.1 percent at $261.11 in extended trading.

"No capital needs to be raised for the Model 3, but we get very close to the edge", Musk said. Some were forecasting a capital raise closer to $2.5 billion.

It does appear that Elon Musk and his team are addressing some concerns that the company is using Wall Street like an equity ATM.

The base model Lucid Air will have "all hardware necessary for autonomous driving", according to Lucid, but the company steers clear of saying whether it will cost more to activate the feature.

"This is at the low end of the $1-2bn we expected and could imply another raise later if the Model 3 is delayed", UBS analyst Colin Langan wrote in a Thursday report.

The convertible notes will give Tesla some flexibility, Levy noted.

Musk, 45, is Tesla's chairman and largest shareholder, with a 20.8 percent stake.

The company lost just under $675 million past year but revenue rose 73 percent to just over $7 billion.

Tesla said underwriters were granted a 30-day option to buy up an additional 15% of each offering, and that Tesla Chief Executive Elon Musk would purchase $25 million of the stock.

Tesla had US$3.39 billion in cash and cash equivalents at the end of 2016, but most comes from a May stock offering, cash from its SolarCity acquisition and almost US$1 billion in draws on its credit facilities. The Model 3 is priced at a moderate $35,000 in the United States, much below the price of its initial models S and X electric vehicles.

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