Tesla looks to raise $1.6B to build its "Gigafactory"

Company will sell convertible notes, stock has risen 45% in the last month

Financial trends and news by Steven Loeb
February 27, 2014
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Tesla's stock has been on an absolute tear over the last month. So now the company seems to be doing the smart thing by looking to strike while the iron is hot in order to raise over a sold amount of money.

The company is looking to raise $1.6 billion by selling convertible senior notes, it was announced on Wednesday. Half of the notes will be due 2019, with the other half due in 2021. In addition, another $240 million are being granted to underwriters, bring the total amount that Tesla can raise to $1.84 million.

Tesla says that it will use the money it has raised to accelerate the growth of its business in the U.S. and internationally.

The money will also be going toward the development and production of its “Gen III” mass-market vehicle, the development of the Tesla Gigafactory and other general corporate purposes.

"As we at Tesla reach for our goal of producing a mass market electric car in approximately three years, we have an opportunity to leverage our projected demand for lithium ion batteries to reduce their cost faster than previously thought possible," the company wrote in a blog post.

"In cooperation with strategic battery manufacturing partners, we’re planning to build a large scale factory that will allow us to achieve economies of scale and minimize costs through innovative manufacturing, reduction of logistics waste, optimization of co-located processes and reduced overhead."

The Gigafactory plant, where the company will manufacture the batteries for its line of electric cars, will be built in one of four states: either Nevada, Arizona, New Mexico or Texas. 

Tesla previously announced that it was going to be raising $830 million in a similar manner in May of last year. CEO Elon Musk said that he would personally buy Tesla shares worth $100 million as part that last fundraising round.

The electric car company hit a bit of a bump a few months ago, after its quarterly earnings showed lower than expected sales of its Model S vehicles..

While year-over-year revenue growth was strong, analysts were expecting Tesla to sell a lot more Model S vehicles. Tesla had posted guidance for the quarter of 5,000 Model S vehicles sold, and it came in ahead of that at more than 5,500. But Wall Street was expecting at least 6,200 sold.

The company has rebounded, though, after a strong Q4 earnings report earlier this month. It was also named as the best overall car by Consumer Reports, which called it "a glimpse into a future where cars and computers coexist in seamless harmony."

The company ended trading on January 24 with its stock price at 174.60; today the stock rose 2.02%, or $5, to $253 a share. That is an increase of 45% in that time.

The stock has risen 69% since the beginning of the year. 

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