The Tesla Model S sedan.
Courtesy of Tesla Motors
By Katie Fehrenbacher
August 13, 2015

Tesla has filed to sell 2.1 million shares, which could net the company close to $500 million. The money will go to the company’s major initiatives including building a massive battery factory in Reno, Nev., designing its planned Model 3 car, and adding more stores and charging stations.

The funding, which follows on billions of dollars that Tesla has raised in debt and equity in recent years, will help the company pay for its massive spending spree as it attempts to grow into a big — and eventually profitable — business with multiple product lines.

Tesla’s billionaire CEO Elon Musk plans to buy 83,974 of the shares for $20 million. The company said in a filing that the proceeds could reach $566.5 million if underwriters purchase the additional shares allowed.

In Tesla’s earnings last week, Musk said that the company could see the value in raising money to reduce risk. However during the call with analysts, Musk and Tesla CFO Deepak Ahuja also downplayed the need for more cash.

 

But Tesla has been going on a massive spending spree this year as it grows its business from making one successful car (the Model S), to selling a line of cars. It has also introduced a line of grid batteries that help building owners and utilities manage their electricity use and cut costs.

At the same time, Tesla is pushing into manufacturing batteries for its own cars and to sell to other companies. Panasonic has already signed on as a partner.

Over the past few years, Tesla has raised billions of dollars in equity and debt, and has opened credit lines. The latest $500 million stock sale is just the latest effort to increase its cash reserves.

Musk has said before that Tesla plans to spend “a staggering” amount of money, or $1.5 billion, on capital expenditures this year. Musk has bragged that he thinks this type of investment could make Tesla worth $700 billion — near Apple’s current valuation — in a decade. (For the record, Tesla’s market value is currently a far more modest $30 billion).

 

Tesla isn’t expecting a return on its investments for a while. It probably won’t be consistently profitable until around 2020, when it’s annual car sales are expected to reach 500,000.

In other words, Musk and Tesla are playing the long game. The company’s stock (TSLA) will no doubt go up and down over the next five years, and it will likely miss its annual numbers and targets here and there. But if you believe in the long term direction and spending vision, then the investment is supposed to eventually pay out with a huge Apple-like win.

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