Tesla To Issue More Stock, Pay Off Energy Dept With Proceeds

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2013 Tesla Model S

2013 Tesla Model S

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Since Tesla issued its first-quarter financials last week, its stock has been on a tear.

Not only did the company have its first profitable quarter ever, but the many investors who had shorted the stock of Tesla Motors [NSDQ:TSLA] are now faced with the threat of expensive margin calls.

So Tesla is taking advantage of the price runup; it announced this afternoon that it would issue up to 2.7 million to 3.1 million more shares of its common stock.

At today's closing price of $84.84 per share, that would net the company $229 million to $263 million. It will also offer $450 million in convertible debt.

CEO Elon Musk simultaneously said he would also buy $100 million of shares with his own funds--$45 million from the new offering--giving it total expected proceeds of about $830 million.

But that's even not the big news.

The remarkable part of the company's release this afternoon is that Tesla plans to use the proceeds of the offering to prepay the remainder of its $465 million low-interest loan from the U.S. Department of Energy, both principal and interest.

That loan was granted in July 2009 as part of the DoE's advanced-technology vehicle manufacturing program, along with much larger loans to Ford ($5.9 billion) and Nissan ($1.6 billion, of which it drew down $1.4 billion).

Last fall, Tesla was deemed a "loser" company by name by unsuccessful Republican presidential candidate Mitt Romney, who criticized a slew of companies to which the DoE loaned or granted money--a few of which have failed, most notably Solyndra.

Paying off its DoE loan entirely removes one stick used by Tesla critics to beat the company: that it is subsidized by your tax dollars and would not otherwise be viable.

Consider articles like this one, for example: Sorry, Tesla's Only Profitable Because Of Your Tax Dollars.

While Tesla Model S electric cars will still be eligible for the same Federal income-tax credit and other incentives as any plug-in car, paying off the loans means the Feds will no longer be in the business of providing operating funds for the company.

Startup Fisker Automotive was also granted $529 million in loans by the DoE, but the department cut off access after the company drew down $192 million.

While Fisker has not filed for bankruptcy, it has not built any of its Karma range-extended electric luxury sedans since last July, and laid off most of its employees last month.

Tesla's Model S electric sport sedan, meanwhile, received a rave review from notably cautious Consumer Reports two weeks ago.


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Comments (10)
  1. Great news, now let's level the playing field nationally for new car companies like tesla. By challenging protectionist dealer franchise laws.


  2. I guess it's expired already. The petition has to collect 100k votes in only 30 days. Last I checked it was just over 5k. This criteria pretty much guarantees that no petition will have to be honored. Unfortunately the petitions I saw that had the highest counts were ridiculous ones like building a Star Trek Enterprise. I think the highest was about 20k?

  3. Brilliant!

  4. Getting the shorts to pay off your government loan - the irony of that is just too sweet. Way to go, Elon.

  5. Good for Tesla for trying to milk the short squeeze bubble for all it's worth. I wonder what Musk will pay for his shares though. Seems illogical to pay full market value when that value is clearly temporary artificially inflated by speculation games.

  6. Yeah, I'm itching to buy some stock, but I just can't justify doing it at this price.

  7. Probably good as a strategy to shut down at least some of the ill-informed critics of Tesla, but I would have loved Elon to have announced that battery swapping would be available for all of the Model S range or even better a new battery chemistry to up capacity/range without adding any further battery mass.

  8. Oh, my days! Here we go with the 'range' thing again. George - do you know what the average daily car mileage in the US is? It's about 35 to 40 miles depending on who you ask. Why do we need cars with more range, then, than 300 miles? Even if we did have them, how would you charge them? And how quickly would you be able to charge them given the limitations of the mains power infrastructure?

    Surely, being able to drive for 3 hours and then stopping for one (or even less) to charge and eat is adequate enough for 99% of average motorists? If not please explain why!

  9. Keep up the facade John, it's quite clear the quarter was not profitable on auto operations. It wasn't even profitable including the ZEV and GHG credits. It took a one-time accounting benefit and an unusual foreign exchange benefit for it to be "profitable". I'm not a Tesla hater, in fact I love the car, but let's call a spade a spade.

  10. Someone accusing John Voelcker of being biased in favor of Tesla - what a refreshing change of pace.

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