Tesla Motors Inc. said it will sell about $1.4 billion in stock to help pay for an expansion that includes its forthcoming Model 3 electric car and boosting annual production to 500,000 vehicles in 2018.
The total sale will be about $2 billion, with the rest of the shares to be sold by Chief Executive Officer Elon Musk to cover tax obligations on stock options he’s exercising, the company said Wednesday in a statement. Tesla plans to sell 6.8 million shares in the offering, or 8.24 million if the underwriters use an option to buy additional stock from the company, according to a prospectus. Musk plans to sell 2.78 million shares.
The shares fell 1.8% to $207.30 in extended trading at 4:38 p.m. in New York. They had closed up 3.2% to $211.17, for a decline of 12% this year.
Tesla faces a sharp rise in spending for its accelerated production plan, which includes making as many as 200,000 of its Model 3 cars by the second half of next year. Tesla is also ramping up its battery factory east of Reno, Nevada, expanding sales and service globally and adding more charging stations for use by customers. For this year, capital expenditures will increase by about 50%, or $750 million, from the company’s original budget, Musk said on a first-quarter earnings conference call on May 4.
“It’s going to make sense for us to raise some amount of money, some combination of equity and debt and make sure the company has a good buffer of cash on hand,” Musk said on the call.
The company had $1.44 billion in cash and equivalents at the end of the first quarter, up from $1.2 billion at the beginning of this week.
Morgan Stanley and Goldman Sachs Group Inc. are leading the stock offering, Tesla said in the prospectus.
The company also said in the filing that it had about 373,000 pre-orders for the Model 3 as of the beginning of this week. Consumers had lined up at stores around the U.S. to order the car, which was unveiled March 31.
“This reservation total is a net number after customer cancellations of about 8,000 and after about 4,200 reservations that we canceled on the belief that they could have been duplicates from speculators,” Tesla said.