Tesla has announced an underwritten registered public offering of about $2 billion of common stock. Tesla is offering about $1.4 billion of shares with the remaining shares to be sold by Elon Musk to cover tax obligations associated with his concurrent exercise of more than 5.5 million stock options. On a net basis, Mr. Musk will increase his overall Tesla shareholdings through these transactions.
Capital supports accelerated ramp of Model 3
Because of the overwhelming demand that it has received for Model 3, Tesla intends to use the net proceeds from this offering to accelerate the ramp of Model 3. As noted in the Company’s first quarter shareholder letter, Tesla intends to start volume production and deliveries of Model 3 in late 2017 and to accelerate its 500,000 unit build plan from 2020 to 2018. Proceeds may be used for working capital and other general corporate purposes as well.
Elon Musk Increases His Shareholdings In Tesla
In connection with this offering, Elon Musk, Tesla’s CEO, will also be exercising stock options to acquire 5,503,972 shares of Tesla stock. These stock options were granted to Mr. Musk in 2009 and are due to expire in December 2016. Because the value of Tesla stock has increased considerably since 2009, Mr. Musk will owe a significant amount of taxes from exercising these stock options and will fund this tax obligation by selling only the amount of shares needed to do so. To be clear, all cash proceeds from the sale of stock by Mr. Musk will go to the federal and state governments to satisfy the 52% tax withholding on his stock option exercise. In addition, Mr. Musk will be donating 1.2 million shares of his Tesla stock to charity. Mr. Musk is a net buyer of Tesla stock in these transactions.