SAN FRANCISCO Tesla Inc (TSLA. O) said on Wednesday it expects to raise about $1.15 billion from a stock and senior notes offering, an infusion of needed capital as the electric car maker enters pre-production of its upcoming Model 3 electric sedan. A capital raise by Tesla has been anticipated since late last year, gaining steam last month after Chief Executive Elon Musk said the company could be "close to the edge" on cash needs. Some Wall Street analysts had predicted that Tesla would seek to raise as much as $2.5 billion in capital.
Tesla has repeatedly turned to Wall Street for fresh capital throughout its history. It has had negative cash flow since 2014 and has posted a quarterly profit only twice since going public. Tesla had $3.39 billion in cash and cash equivalents at the end of 2016, but most comes from a May stock offering, cash from its SolarCity acquisition and nearly $1 billion in draws on its credit facilities.
Tesla's warning that it would spend $2 billion-$2.5 billion in the first half of 2017 in capital expenditures left little cushion at a critical time ahead of its Model 3 production, which the company says will begin in July. The company's shares, which are down 9 percent since a 52-week year high in February, rose 2.1 percent to $261.11 in after-hours trade.
Tesla said it would offer $250 million of common stock and $750 million of convertible senior notes due in 2022 in concurrent underwritten registered public offerings. Tesla said it would use the proceeds to "strengthen its balance sheet and further reduce any risks associated with the rapid scaling of its business due to the launch of Model 3, as well as for general corporate purposes."The Silicon Valley-based company also said Musk will participate by purchasing $25 million of the company's stock.
U.S. stocks rose sharply on Wednesday after the Federal Reserve raised interest rates for the second time in three months, as expected. The Fed, which raised its target rate by 25 basis points, or a quarter of a percentage point, to between 0.75 and 1.00 percent, did not however flag any plan to accelerate the pace of monetary tightening, a concern that had lingered among some market participants. Markets were expecting the Fed's decision and traders had priced in more than a 90 percent chance of a quarter-point rate increase, according to federal funds futures."People were thinking the Fed might be more aggressive, so the fact that they weren't means more complacency and a continued course," said Eric Schoenstein, co-portfolio manager of the Jensen Quality Growth Fund in Portland, Oregon."The statement was not as hawkish as it might have been."
The Dow Jones Industrial Average . DJI rose 112.73 points, or 0.54 percent, to close at 20,950.1, the S&P 500 . SPX gained 19.81 points, or 0.84 percent, to 2,385.26 and the Nasdaq Composite . IXIC added 43.23 points, or 0.74 percent, to 5,900.05. The Russell 2000 index of small-cap stocks rose 1.5 percent, while financials on the S&P 500 . SPSY were the worst-performing sector. U.S. retail sales recorded their smallest gain in six months in February, setting U.S. gross domestic product on track to grow at a 0.8 percent annualized pace in the first quarter, according to the Atlanta Fed's latest forecast.
Energy stocks boosted the S&P 500 as oil prices rose for the first time in more than a week on a surprise drawdown in U.S. crude inventories. U.S. crude CLc1 gained 2.7 percent to $49.01 per barrel and Brent LCOc1 added 2.1 percent to $51.99. Exxon shares (XOM. N) rose 1.2 percent and Chevron (CVX. N) added 1.4 percent. Apple (AAPL. O) was up 1.1 percent at $140.46 after RBC raised its price target on the stock.