Updated from 11:06 A.M. to include Musk comments from earnings call in third paragraph.
NEW YORK (
(TSLA - Get Report)
CEO Elon Musk is putting his money where his mouth is, with Tesla's capital raise
. That shows incredible confidence in the future of the electric car maker, especially with the stock up more than 160% year-to-date.
After the market close on Wednesday, Tesla said it will issue up to 3.1 million new shares and $450 million in convertible notes, as the company shores up its balance sheet and pays off a Department of Energy loan. The company said it expects to raise $830 million in the deal, with a huge commitment coming from Musk. Musk will buy $45 million of Tesla's stock in the offering and an additional $55 million in a private placement, putting Musk's new investment in the company worth an additional $100 million.
The capital raise was expected by many, and Tesla is smart to take advantage of the incredible run-up in its stock. Morgan Stanley analyst Adam Jonas asked about the possibility of a capital raise on the first-quarter earnings call, and Musk noted the company did not have any plans then, but something could happen. "But it's always possible that we could be opportunistic about raising a round, but there's no -- like we've spent no time on that at all, so if we were to do a round, it would be for the reasons that you mentioned, which is to ensure that if there was some unexpected supply interruption, some risk event, to essentially protect against a (force majeure) event that there could be some merit to doing a round," Musk said on the call.
What's even more incredible is the fact Musk is buying here, not selling. One would expect that Musk would cash out some of his new found fortune, but Musk is showing even more confidence in the Palo Alto, Calif.-based Tesla.
As a shareholder, that's what you want to see, with your CEO increasing his bet on the company, not reducing it. Wall Street in the short-term is a voting machine, and perception is reality. With Musk putting more weight behind the company, Wall Street feels increasingly confident about its future prospects, and thus its stock price.
Shareholders are rewarding that faith, with Tesla shares moving higher in early Thursday trade, up around 6%.
Tesla has demonstrated to the market
demand is exceptional
for its Model S electric car, as first-quarter sales jumped 83% year-over-year to $562 million and the company earned 12 cents a share in profit. That blew past analysts expectations, who were looking for $499.55 million in revenue and 4 cents a share in earnings.
Tesla is now producing more than 400 Model S vehicles a week. It was able to recognize 4,900 cars as revenue, as the company turned profitable for the first time in its 10-year history.