Tesla to Repay DOE Loan via Stock Offering - Analyst Blog

Good news from Tesla Motors Inc. (TSLA) again! The electric car maker plans to raise as much as $830 million through a stock and debt offering that will not only be utilized to repay $465 million U.S. Department of Energy (DOE) loans with interest but also for general corporate and other purposes, may be expansion plans.

Tesla thought it is better to strike the iron when it is hot. Its share prices started soaring following the reports of its first-ever quarterly profit on May 8. After the earnings release, share price surged nearly 53%.

On May 14, Tesla shares hit new 52-week high of $97.12, which is above its previous level of $88.00 a day before, and closed at $83.24 on the same date. The closing price represented a whopping one-year return of 176.9% and year-to-date return of 135.4%. The announcement of new stock and debt offering would definitely act as another catalyst in pushing up the share price.
    
Tesla plans to offer 2.7 million shares and $450 million in convertible debt due in 2018. Tesla has also given a 30-day option to its underwriters to buy an additional 405,454 common shares and $67.5 million in notes. Considering the last closing price of $84.84, the stock offering would raise $229.1 million, excluding the sale of additional shares to underwriters.

Tesla’s chief executive officer and cofounder Elon Musk plans to purchase $100 million worth of shares at the same public offering. Of the total amount, about $45 million worth of shares would be acquired through the common stock offering and the remaining $55 million would be purchased directly in a private placement. Currently, Musk holds about 27 million shares of Tesla, which is equivalent to roughly 24% of the company's outstanding shares.

In 2012, Tesla lost $396.2 million or $3.69 per share compared with $254.4 million or $2.53 per share in 2011. Due to a good start in 2013, the company had expected to repay its DOE loan much earlier and boost production of vehicles to lower production cost. Tesla made its first DOE loan repayment of nearly $13 million in December last year.

Tesla reported its first-ever quarterly profit of $15.4 million, or 12 cents per share (on an adjusted basis) in the first quarter of 2013 compared with a loss of $79.3 million or 76 cents in the corresponding quarter of 2012. This indicated a whopping positive earnings surprise of 271.4% given the Zacks Consensus Estimate of a loss of 7 cents for the quarter.

Revenues jumped manifold to $561.8 million from $30.2 million in the first quarter of 2012. Thanks to the impressive 5,000 units of Model S electric car sales during the quarter.

The automaker continued to supply full electric powertrains and battery packs to Toyota Motor Corp. (TM) for their RAV4 EV program. It also completed various deliverables under Daimler’s (DDAIF) Mercedes Benz B-Class EV program, which contributed to total development services revenues of nearly $7 million.

Tesla expects to manufacture 5,000 Model S vehicles in the second quarter of the year. For full year 2013, the company expects to deliver 21,000 Model S cars globally, up 5% from its prior guidance of 20,000 units.

Shares of Tesla retain a Zacks Rank #3, which implies a short-term (one to three months) Hold rating. Currently, Peugeot S.A. (PEUGY) with Zacks Rank #2 (Buy) is performing well in the broader automotive industry.

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