DETROIT (AP) — Tesla CEO Elon Musk is more than doubling the stock he will buy in a new public offering in an apparent bid to earn investors’ confidence as he tries to turn around his struggling electric car company.
Musk raised his latest investment from $10 million to $25 million on Friday as Tesla boosted the size of a note-and-stock offering to raise much needed capital to keep the company going.
On Thursday, when Tesla first disclosed the offering, it was valued at up to $2.3 billion. But due to a positive response, the company on Friday raised the offer to as high as $2.7 billion.
Musk likely raised his stake to show shareholders that he’s taking the same risk that he’s asking investors to, said Gartner analyst Michael Ramsey.
But Musk also is guarding against dilution of his ownership stake, he added. Musk is by far the company’s largest shareholder, holding about 20% of the company’s outstanding shares.
The offer, detailed in a filing Friday with the U.S. Securities and Exchange Commission, includes up to $1.84 billion in notes that pay 2% annual interest and convert to Tesla common stock in 2024. Also included are more than 3.5 million new shares worth as much as $866 million. Last week, Tesla reported its cash balance at the end of the first quarter shrunk by $1.5 billion since December, to $2.2 billion. Musk said during a conference call that Tesla might need to raise capital again.
The company will use the proceeds to “further strengthen our balance sheet, as well as for general corporate purposes,” the filing says.
But the offerings would raise the company’s debt from $9.79 billion to as high as $11.63 billion, with the company admitting that it may not be able to generate enough cash to make all of the payments.
“If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive,” the company wrote in the part of the filing that discusses risk factors.