Tesla Makes Secondary Stock Offering

Moneybox
A blog about business and economics.
May 16 2013 5:13 PM

Tesla Makes Secondary Stock Offering

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The Tesla Model X is introduced at the 2013 North American International Auto Show in Detroit on January 15, 2013.

Photo by STAN HONDA/AFP/Getty Images

In theory, one thing a firm with a high share price can do is sell extra shares to the public to raise money. In practice, this is very rarely done but today Tesla Motors announced plans to do just that.

With the company's shares surging recently, it's going to sell 2.7 million more to the public to build up a cash stockpile and fund future investments. One possible difference-maker here is that about a quarter of the new shares will be sold to none other than Elon Musk himself for $100 million. An issue with secondary offerings, after all, is that a firm's managers deciding to sell extra shares sounds a lot like the CEO giving a vote of no confidence in his own company. The fact that Musk is increasing his personal investment in the company is a way to do a secondary offering without that taint.

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Simultaneously, Tesla is going to raise $450 million in the bond market and use the proceeds to pay off its loan from the Department of Energy. All told it's an aggressive, confident move and I like it.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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