Tesla announced on Thursday it plans to raise up to $2 billion, of which $1.35 billion comes from convertible paper and $650 million from new equity, which includes a major purchase from Chief Executive Elon Musk.
Musk intends to buy about $10 million of shares of the electric car manufacturer in the new offering. The total offering is 2.7 million Tesla shares. Prior to the IPO, Musk had about 20% of Tesla’s outstanding shares valued at about $12.6 billion.
The move comes just a week after Musk postponed questions about the company’s capital increase anytime soon.
” I don’t think raising capital should be a substitute for making the company operate more effectively, Musk told shareholders at the company’s quarterly conference. “I do think there is some merit to raising capital, but this is sort of probably about the right timing.
Musk was pressed on the subject by Wall Street analysts, as Tesla acquired about $2 billion in cash after the first quarter of 2019.
Tesla shares fell earlier in the pre-market session on Thursday when the company set up an initial filing indicating it would offer a mix of debt and equity securities. The stock reversed its course and was trading 4.8% higher when a second file revealed the details of the offeiring, including Musk’s interest in buying new shhares.
Musk’s purchases were short-term reliable buying signals for the stock. After the last five purchases by Musk, stocks rose on average by 41% in the next three months. Tesla shares have been under pressure recently, dropping almost 30% this year.
“There was growing fears that this company was going to need incremental cash going to the second half of the year,” Dan Ives, managing director of equity research at Wedbush Securities said. “Now there’s a relief because the liquidity issue and the finance concern could be put to rest in the near term.”