Two cheers for Tesla (Nasdaq: TSLA ) ! Hip-hip ... boo?
Bad news first: Yesterday, Tesla Motors basically admitted that developing its Model X electric "crossover" vehicle is going to cost a whole lot more cash than it's got handy. (Not surprising. As we discussed last week, developing the company's Model S sedan alone will run a cool $400 million.) To fund creation of its third electro-buggy, Tesla yesterday announced plans to:
- Issue 5.3 million common shares in a public offering.
- Float another 795,000 shares as an "overallotment option" if the offering proves popular.
- Increase the share count by another 2.1 million shares through a pair of private placements.
In all, these follow-on share offerings will increase Tesla's float by as much as 8.2 million shares -- diluting away 8.6% of the ownership stakes of existing shareholders.
So why'd the shares jump 8%?
This, as I say, is the bad news. Now here's the good news: You know those two private placements I mentioned at the end? They're both going to existing shareholders who are doubling down on their investments. Tesla founder Elon Musk is in for 1.5 million shares. Tesla investor Daimler is in for an additional 644,475 shares -- which, at 12.7% of the total offering, represents an increase in its ownership stake in Tesla. (No word yet on whether Toyota (NYSE: TM ) and Panasonic (NYSE: PC ) , also Tesla shareholders, will follow suit.)
Another thing to cheer about: Both Musk and Daimler are paying through the nose. While the final share price of the various offerings is not yet set in stone, preliminary data from the firm's S-1 filing assume a sales price of $26 for the public offering and overallotment portions of the share issuance -- but $26.35 for Musk's and Daimler's investments. That's right. Both Musk and Daimler have so much confidence in Tesla that they're both prepared to pay more than anyone else is asked to shell out.
Any Fool betting that Tesla would wither on the vine, and cede the electric car market to mass-marketeers Nissan, General Motors, and Ford, had better think again. Investors who are "short" the stock -- and I know there are a lot of you -- should also feel nervous today. Because whether Tesla ultimately succeeds or fails, one thing's now clear:
Tesla's not going down without a fight.
Ah, but will it win the fight? Add Tesla to your Watchlist and read along as we follow this story.