Tesla's need for cash has finally slipped beyond the point where CEO Elon Musk can continue to pretend to ignore it, and instead has been given a violent thrust into urgent, as the company filed this morning to offer about 2.7 million shares (~$650 million in stock) and $1.35 billion in convertible notes one week after Musk said there was merit to the cash-crunched company raising more capital. Shares popped on the news in the pre-market session on news Musk would participate in the offering:
The entire financing seeks to raise about $2B. The converts will add another maturity to the company's nearly $11 billion in debt it already carries and, by our back of the envelope calculations, the equity issuance will dilute current shareholders by approximately 1.25%. The senior convertible notes will be due in 2024.
To put a lipstick on the dilution pig, CEO Elon Musk has indicated his "interest" in purchasing up to about 42,000 shares, or a paltry $10 million of the offering. This equates to about 0.045% of Musk's reported $22 billion net worth. According to FinTwit regular @bgrahamdisciple, Elon Musk is the only executive officer or director who has purchased shares in the last 12 months. Other executive officers and directors have executed 41 sales in the past 12 months.
Goldman Sachs, Citigroup, BofA, Deutsche Bank, Morgan Stanley, Credit Suisse, Soc Gen and Wells Fargo will be handling the offering. As Mark Spiegel points out, the lead underwriter on the stock has a "sell" rating on the name and a $200 price target.
The response on Twitter from those who follow the story closely was mostly bemused:
$TSLA $2B is not enough. And Musk’s virtue signaling purchase is laughable relative to recent continued insider selling by Straubel, Gracias, Buss, etc.
— Diogenes (@WallStCynic) May 2, 2019
$TSLA will burn around $1.5B just in operations this year, before repaying any debt or spending anywhere NEAR its projected capex. This is a band-aid on the path to oblivion.
— Mark B. Spiegel (@markbspiegel) May 2, 2019
Size of this offering is just enough to plug the working capital deficit. $TSLA pic.twitter.com/UoSzmd62b8
— Charley Grant (@CGrantWSJ) May 2, 2019
Hey morons, err' $TSLA longs': this isn't a bought deal. No one has ponied up the $2B+ yet. Who's in and and what price? 🤣 Gali - you good for $1K?
— CVC Research (@CVCResearch) May 2, 2019
Stock should be tanking on this IMO. who gives a fuck if the toothless @SEC_Enforcement allows this fraud to sucker more fools?
You can read the preliminary prospectus here.