Fresh off its first profitable quarter, Tesla Motors Inc. plans to raise about $830 million in a stock and debt offering that will enable the electric car maker to pay off its $465-million federal loan.
Founder Elon Musk, who owns 33 million shares, or 27.5%, of Tesla, planned to buy 1.2 million additional shares for about $100 million as part of the deal, which would slightly increase the percentage that he owns, the Palo Alto company said Wednesday in announcing the recapitalization.
The announcement, made after regular stock trading had closed, deepened investors’ recent love affair with the 10-year-old company, which went public in June 2010. Tesla shares jumped $7.16, or 8.4%, to $92 in after-hours trading.
Tesla shares already had rocketed up more than 50% in the week since Tesla said brisk sales of its Model S luxury sedans had yielded a first-quarter profit of $11.2 million.
The earnings, compared with a year-earlier loss of $89.9 million, worked out to 12 cents a share. The consensus of financial analysts following Tesla had been for 4 cents a share.
Raising new capital now “is a smart move because the company is smoking hot in the stock market,” said Thilo Koslowski, a senior automotive analyst at technology research firm Gartner Inc. “It’s quite amazing – we haven’t seen anything like this from an automotive company in a long time.”
Koslowski said the move was a reputation enhancer as well as savvy financially, showing Tesla “doesn’t just want money from the government.”
“A lot of people still have some bad memories about automotive companies getting money from the government during the financial crisis and not paying it back,” he said.
Repaying the government would help offset the Obama administration’s losses on other investments in electric technology. It also serves as something of a rebuke to former Republican presidential candidate Mitt Romney, who during a debate lumped Tesla in as one of Obama’s losers along with Solyndra, the Fremont, Calif., solar panel maker whose 2011 bankruptcy cost taxpayers more than $400 million.
In regulatory filings, Tesla said the $465 million from the Energy Department enabled it to develop and produce the Model S, a knockout success with auto critics and wealthy car buyers that recently earned the highest marks Consumer Reports ever bestowed on a newly introduced car.
Tesla said the debt component of the offering would include at least $450 million in convertible senior notes, with the underwriters having an option to purchase up to $67.5 million in additional notes.
The company plans to offer at least 2.7 million new shares of common stock to investors, with the underwriters able to purchase more than 405,000 additional shares to satisfy demand.
Musk intends to purchase $45 million of the common stock offering and $55 million directly from Tesla in a private placement.
Tesla, which already had made two quarterly payments on its debt to the federal government, said it would use about $452 million of the proceeds to retire the rest of the debt. The rest of the new funds would be used to pay the cost of certain hedge transactions and for general corporate purposes.