Morgan Stanley Underwrites Tesla Motors Inc (TSLA) After Raising PT

Updated on

Tesla Motors Inc (NASDAQ:TSLA) shares soared to a record high after the company announced its plans to build its gigafactory. The $5 billion battery manufacturing plant will become operational by 2017, and will reach its peak capacity by 2020. The gigafactory will produce enough batteries to supply power to 500,000 cars per year. It will bring down the cell costs, helping Tesla produce Gen III mass market cars. Company executives say the gigafactory will reduce the Li-ion battery production cost by about 30%.

Morgan Stanley a book-runner for Tesla’s convertible note offering

But an interesting thing about it is Morgan Stanley’s view on Tesla Motors Inc (NASDAQ:TSLA). On Tuesday, February 25, Morgan Stanley raised its price target on the stock from $153 to an ultra-bullish $320 per share. The research firm said that the gigafactory will help Tesla disrupt not only the automobile industry, but the electric utility industry as well. Morgan Stanley forecasts Tesla’s revenues to jump from $2.5 billion in 2013 to $75 billion by 2020. And on Wednesday, February 26, it was jointly named the book-running manager along with Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB), JPMorgan Chase & Co. (NYSE:JPM), and Goldman Sachs Group Inc (NYSE:GS).

Tesla Motors Inc (NASDAQ:TSLA) said in an SEC filing that it will raise $1.6 billion in convertible notes. The electric vehicle maker will be offering $800 million in convertible notes due 2019 and another $800 million convertible senior notes due 2021. Of course, there will be another $240 million in convertible notes that will be available exclusively to underwriters. It brings the total to $1.84 billion. Tesla intends to contribute about $2 billion of the $4-$5 billion required to build the gigafactory. The remaining amount is likely to be financed by Japan’s Panasonic Corporation (NYSE:PC) (TYO:6752).

When the San Francisco-based company announced a similar capital raising program in May 2013, Elon Musk said he will lead the capital raising program by buying $100 million of stock. This time, Musk didn’t make any such announcement. His net worth is in excess of $10 billion today. Investors have increasingly been bullish on Tesla Motors Inc (NASDAQ:TSLA). The Elon Musk-led company capitalized on the stock’s soaring popularity to raise $1.6 billion to finance its future plans.

Four states trying to woo Tesla for $5 billion investment

Tesla Motors Inc (NASDAQ:TSLA) has zeroed in on four Sunbelt states for its gigafactory. The company is looking for sites with 500-1000 acres area in Nevada, Texas, New Mexico and Arizona. The plant will be powered by wind and solar energy, and will create 6,500 new jobs. Each of the four states is likely to offer attractive incentives to bring the plant in their state.

We have already seen how Arizona poured incentives upon incentives into Apple Inc. (NASDAQ:AAPL)’s bucket when the iPhone maker was looking for a site to produce sapphire glass. The same is likely to happen with Tesla Motors Inc (NASDAQ:TSLA) considering the size of investment and potential job opportunities. Though the automaker hasn’t revealed much about the location of potential sites, the Reno Gazette-Journal reported last week that Tesla has expressed interest in a site near the Tahoe Reno Industrial Center and Reno-Stead Airport. That will be the closest location to Tesla’s car manufacturing plant, which is located in Fremont, California.

Tesla Motors Inc (NASDAQ:TSLA) shares surged 5.14% in pre-market trading Thursday to $266.

Leave a Comment