Tesla Raises $2.7Bn Capital Through Equity And Convertible Bond Issuance

Today, Tesla Inc (NASDAQ:TSLA) saw nearly a $2.35 billion of capital infusion through the combined equity and convertible bond issuance. Below are the comments from analysts on what this mean for the company’s forward earnings.

Tesla equity and convertible bond issuance

Blomst / Pixabay

Baird Equity Research

Tesla’s ~$2.35B upsized equity and convert bond issuance (~$2.7B if underwriters exercise options to purchase additional shares/notes) was a prudent move to bolster the balance sheet, and surplus cash should help alleviate investor concerns around liquidity. The raise should refute lingering concerns about TSLA’s ability to access capital markets which has been a pesky rumor for at least six months. We are updating our model to reflect the offering and remain buyers ahead of improving cash generation and EPS for the balance of 2019.

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Q1 hedge fund letters, conference, scoops etc

BofAML

Last week, TSLA completed a public offering of $863mm in common stock and $1.84bn in convertible notes due 2024, for roughly $2.7bn in total gross proceeds (upsized from original $2.3bn offer and including the greenshoe). In our view, the capital raise comes as little surprise given TSLA’s more precarious liquidity position at 1Q:19 (cash balance dropped $1.5bn QoQ to $2.2bn), its ambitious growth plans in 2019+ (Shanghai plant construction, Model Y/Semi/Roadster launches, AV/EV ride-sharing network, etc.), as well as CEO Elon Musk’s comment on the 1Q conference call that “there is merit to the idea of raising capital at this point”.

Wells Fargo

The $2.7bn capital infusion offers a 12 month bridge to localize Chinese sales and Model Y… without which we struggle to see demand growing. Increased dependency on China and robotaxi undermines the resilience of the Tesla investment story. We have updated our earnings model to account for the $2.7bn of combined equity and convertible bond issuance and share the following thoughts on EW-rated Tesla.




About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver