Tesla wants to issue new shares in order to produce the new Model 3 faster. The company wants to raise additional capital quickly in order to meet demand, which is higher than expected.
Additional shares Tesla
Model 3 is a relatively affordable electric car and is significantly cheaper than the sports car model S. After the demonstration of two prototypes 373,000 orders were placed by a large group of people. The company expects to enthuse more people with a starting price of $ 33,000. Tesla didn’t foresee the enormous success of the Model 3, which caused part of the pre-orders to have been canceled already. Tesla has set a reservation maximum of two cars per person. Consequently, several large orders have been canceled and the company seemed unable to meet demand for the new model.
Elon Musk buys Tesla shares
CEO Elon Musk announced earlier that he was going to need additional capital after receiving the huge number of orders. With this the CEO is seeking to boost production to half a million cars a year by 2018. This is ten times the production volume of 2015 and comes two years earlier than planned. For this capital injection Tesla will be issuing additional shares again. Since 2010 Tesla has raised about $ 4.5 billion and now wants to raise another $ 2 billion. Part of this revenue comes from the sale of Elon Musk’s shares. The announcement of this news caused Tesla’s shares to drop by about 2.2%.
Tesla will have to finance $ 2.25 billion to meet its capital expenditures this year. This is intended to build factories and for suppliers to produce the Tesla Model 3. The company reported a loss of 282.3 million dollars in the first quarter and now wants to make significant cost savings to improve profitability.