Tesla Gigafactory Rendering - Tesla Will Invest $2 Billion Into Its Development

Tesla Gigafactory Rendering - Tesla Will Invest $2 Billion Into Its Development

After the market closed on Tuesday, Tesla made a couple pretty big announcements.

With This Transaction, Tesla Has Pretty Much Fully Funded All Aspects Of Their Upcoming 3rd Generation Car

With This Transaction, Tesla Has Pretty Much Fully Funded All Aspects Of Their Upcoming 3rd Generation Car

Depending on your prospective, the first was the 'big reveal' of plans for their US-based Gigafactory, capable of supplying enough cells to produce 500,000 cars per year as soon as 2020, with production kicking off in 2017.

But how to pay for it all?

It has been no secret that Tesla's soaring market cap and respect in the market has been a thing of wonder the past couple years, and to no one's surprise today Tesla also announced that it was planning to raise between $1.6 billion and $1.84 billion in a new offering of convertible senior notes.

The new capital will also cover development of Tesla's 3rd generation car, which is expected to retail between $35,000 and $40,000 with a range of 200 miles when it arrives in 2017.

Tesla closed Wednesday with a market cap of $31.07 billion dollars, and traded higher in early after hours action (real time quote can be found here)

Tesla's Market Cap Crested $31 Billion On Wednesday

Tesla's Market Cap Crested $31 Billion On Wednesday

Tesla said in a statement what their plans were for the new capital:

"Tesla intends to use the net proceeds from the offering to accelerate the growth of its business in the U.S. and internationally, for the development and production of its “Gen III” mass market vehicle, the development of the Tesla Gigafactory and other general corporate purposes."

Goldman, Sachs & Co., Morgan Stanley, J.P. Morgan and Deutsche Bank Securities are acting as joint book-running managers for the offering.

Tesla's full statement can be found below:

Tesla Announces $1.6 Billion Convertible Notes Offering

Wednesday, February 26, 2014

PALO ALTO, Calif., February 26, 2014 – Tesla announced today an offering of $1.6 billion aggregate principal amount of convertible senior notes in an underwritten registered public offering. Of the total offering, Tesla will offer $800 million aggregate principal amount of convertible senior notes due 2019 and $800 million aggregate principal amount of convertible senior notes due 2021. In addition, Tesla intends to grant the underwriters a 30-day option to purchase up to an additional $120 million in aggregate principal amount of convertible senior notes due 2019 and an additional $120 million in aggregate principal amount of convertible senior notes due 2021, for a total potential offering size of up to $1.84 billion.

Tesla intends to use the net proceeds from the offering to accelerate the growth of its business in the U.S. and internationally, for the development and production of its “Gen III” mass market vehicle, the development of the Tesla Gigafactory and other general corporate purposes.

The convertible senior notes due 2019 will be convertible into cash, shares of Tesla’s common stock, or a combination thereof, at Tesla’s election. The convertible senior notes due 2021 will be convertible into cash and, if applicable, shares of Tesla’s common stock (subject to Tesla’s right to deliver cash in lieu of such shares of common stock). The interest rate, conversion rate and other terms of the notes are to be determined.

In connection with the offering of the notes, Tesla intends to enter into convertible note hedge transactions and warrant transactions, which are generally expected to prevent dilution up to approximately 100% over the common stock price at the time of pricing of the notes due 2019 and 120% over the common stock price at the time of pricing of the notes due 2021. Tesla intends to use a portion of the proceeds from the offering to pay the net cost of the convertible note hedge transactions. In connection with establishing their initial hedge of the convertible note hedge and warrant transactions, the hedge counterparties or their affiliates expect to enter into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the notes, including with certain investors in the notes.