This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Tesla Bubble Talk Aside, Give the Bankers Some Credit

Updated from 12:57 p.m. ET to correct information from Morgan Stanley report

NEW YORK (TheStreet) -- In a Feb. 25 report that valued Tesla (TSLA - Get Report) at 62 times forecast fiscal 2015 earnings, Morgan Stanley analyst Adam Jonas hinted that the company could disrupt the trillion dollar electric utility industry and lay the foundation for a utopian society. Even if those high hopes don't pan out, Wall Street should get some credit as money rushes into the Elon Musk-run company at ever-higher prices.

Tesla, for all the talk it generates of a stock market bubble and irrational exuberance among tech sector investors, is a strong example of what should be celebrated about Wall Street. And yes, there are many good reasons for investors to be skeptical of the company's meteoric share price rise.

Through a series of equity offerings and a newfound focus on convertible debt offerings, Tesla and its bankers Goldman Sachs, Morgan Stanley, JPMorgan and Deutsche Bank, are in the process of raising billions in private capital to fund the company's efforts to commercialize the electric car and, more recently, the "gigafactory," a $4 billion-to-$5 billion plant to build more powerful batteries for electric vehicles.

So far, Tesla likely has a lot of credibility with Wall Street, and it is no surprise the company is now in the process of its biggest-ever capital raise, a $1.6 billion convertible note offering to finance the multi-billion dollar gigafactory.

Consider Tesla's capital raising history, even as the company has faced skepticism from short-sellers and the like since going public in 2010. Any long-term investor buying a Tesla offering has so far made money from the company.

Here's a schedule of the company's capital raising history:

  • Tesla priced an initial public offering of 13.3 million shares at $17 apiece, raising $226.1 million in capital on June 28, 2010.
  • Tesla priced a secondary offering of 6.92 million shares at $28.25 apiece, raising $195.65 million in capital on Sept. 28, 2012.
  • The company priced another secondary offering of 3.93 million shares at $92.4 apiece, raising $313 million in capital on May 17, 2013.
  • Tesla's convertible notes would effectively convert into 4.81 million shares at $124.52 apiece, raising $600 million in capital.

Now, Tesla is offering two series of $800 million convertible notes due in 2019 and 2021 respectively, which would convert to equity at a price of 120% above the company's share price at the consummation of its convertible offering. Tesla said proceeds from the convertible offering will be used for invest in projects like the gigafactory.

The interest rate off the offering isn't yet disclosed. In a mid-2013 convertible note offering, Tesla's first as a public company, the company offered five-year notes at a coupon of just $1.5%.

One unheralded story from the convertible note offering is how Wall Street, through normal underwriting activity, has lined up smart financing for Tesla, and in a manner that so far has benefited shareholders, the company and those who believe in the importance of investing in electronic vehicles and battery technologies.

By offering notes to repay its Department of Energy loans in May, Telsa was able to shore up its balance sheet and cancel stock warrants that would have been extremely dilutive to shareholders.

Now, after just three secondary offerings since its IPO, the company and its bankers have found mechanisms to finance what some believe is a groundbreaking project in the gigafactory. Again, the deal is structured in a way to minimize any long-term shareholder dilution.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
TSLA $203.34 0.00%
AAPL $128.46 0.00%
FB $78.97 0.00%
GOOG $558.40 0.00%
YHOO $44.28 0.00%


DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs