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By Alexandria Sage
SAN FRANCISCO, March 17 Tesla Inc's
$1.2 billion share and convertible debt offering on Friday
demonstrates once again the unflagging ability by the luxury
electric carmaker and its high-profile head, Elon Musk, to tap
Wall Street for sorely needed cash.
In its second such capital raise in the past 12 months, the
Silicon Valley company offered stock and convertible notes,
roughly 20 percent more than it planned but less than what
investors had generally been expecting, ahead of the launch of
its crucial Model 3 sedan,
Tesla's stock was up slightly to $262.42 in afternoon trade
on the Nasdaq.
The capital raise removed "an overhang on the stock," in the
eyes of investors, wrote analyst Jamie Albertine of Consumer
Edge Research, given uncertainty over how Tesla would meet its
robust spending needs, from the Model 3 to its massive battery
factory in Nevada.
More broadly, the successful offering underscores the
ability of Musk to convince Wall Street over and over of his
long-term vision - that Tesla will someday become a carbon-free
energy and transportation heavyweight.
Despite facing major financial hurdles, and the dilutive
nature of stock sales, the triumphant offering confounds Tesla
skeptics, who point to the loss-marking company's $42.37 billion
market capitalization - greater than that of Nissan Motor Co Ltd
, which reported a profit of $4.7 billion last year.
Tesla's plan to spend $2 billion-$2.5 billion in the first
half of 2017 in capital expenditures ahead of the July Model 3
launch left little cushion with $3.39 billion on the books in
cash and cash equivalents at the end of 2016.
"Liquidity and cash burn remain key near-term risks, and
investors may grow weary of continued raises as this is the
second capital raise in a year," wrote UBS analyst Colin Langan.
The bulk of Friday's offering, or $850 million, came from
convertible senior notes due 2022, with $350 million raised from
the sale of 1.3 million common shares at $262 apiece. (bit.ly/2n5Bf8C)
That was higher than the $250 million in stock and $750
million in notes the company said it expected to sell.
Musk, already the company's top shareholder with a stake of
about 21 percent as of December, bought 95,420 common shares for
$25 million in the latest stock sale, Tesla said.
The 1.3 million shares sold represents about 0.8 percent of
Tesla's outstanding shares as of Dec. 31.
(Reporting by Alexandria Sage in San Francisco and Rishika
Sadam in Bengaluru; Editing by Savio D'Souza, Bernard Orr)