Tesla Sells Shares to Repay Dept. of Energy Loan
Apply for a Loan
Secured with SHA-256 Encryption
UPDATED: May 17, 2013
Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.
Tesla Motors Inc. is planning to sell 2.7 million shares to raise money to pay off its Department of Energy loan early.
The company, best known for its high-end, critically acclaimed electric cars, intends to offer up to 3.1 million common shares as well as $450 million in notes. In total, the company plans to make approximately $830 million.
Elon Musk, Tesla’s billionaire owner, also plans to buy 1.08 million shares, valued at around $100 million.
The news comes after a string of victories for Tesla. Tesla reported a net profit for the first time during the first quarter of 2013, and stock prices have tripled. Most recently, the brand’s Model S was named Consumer Report’s best car since 2007.
Tesla’s success is good news for American taxpayers and the government’s shaky Advanced Technology Vehicles Manufacturing loan program. In the years since the DOE started loaning millions to green companies, there have been two major failures. First Solyndra, a solar panel company, went bankrupt. Then, earlier this year, rival electric car company Fisker Automotive stopped production and failed to make its first payment.
In March, Tesla and the DOE reached an agreement allowing the company to repay their loan in half the time. Under the new terms of the loan agreement, Tesla still has five years to repay their $465 million loan. If they’d gone the way of Fisker and failed to meet their loan deadlines, the government has warrants which allow them to buy Tesla stock at a fraction of the price.
Currently Tesla stock is trading at just above $97. Under the warrants, which would take affect in 2018, the government would be able to buy 3 million shares at $7.54 and an additional 5,100 shares at $8.94. If Tesla stock maintains its current price, those stock prices would net the government approximately $277 million in profit.
In a comment to the Wall Street Journal, Goldman Sachs analyst Patrick Archambault estimated that the share of sales could drop Tesla’s per-share earnings by five cents in 2013. However, by freeing itself from its loan commitment to the DOE, Tesla will greatly reduce its debt and gain better access to capital. As the company gears up for new projects – including a Model S sport utility vehicle and a more affordable sedan – reducing debt is a key priority for the company.
Though Tesla stock prices fell 3 percent following the announcement, prices are expected to continue their upwards trajectory, with Musk promising more big news to be announced next week.