Tesla Motors Inc. CEO Elon Musk (AP Photo/Francois Mori)
Tesla MotorsTSLA +3.11% didn’t wait long to ask investors for more money to fund its ambitious plan to accelerate production of its next vehicle, the $35,000 Model 3.
Earlier this month, Tesla Chief Executive Elon Musk shocked the industry by vowing to produce 500,000 electric vehicles a year by 2018, two years earlier than planned, citing the ”overwhelming demand” for the upcoming EV. He warned that the new plan would drain cash and that the company would likely have to raise more capital.
So after today’s market close, it really came as no surprise that Tesla said it would sell about $1.4 billion in new stock, and that founder Elon Musk would sell another $600 million worth of shares to cover taxes he must pay in order to exercise more than 5.5 million stock options that were granted in 2009 and are due to expire at the end of this year.
Tesla noted that Musk will increase his overall Tesla shareholdings through these transactions.
Tesla said the money will be used to accelerate the ramp of Model 3 starting in late 2017, and perhaps for working capital and other general purposes as well.
Musk’s 52% tax bill from cashing in his options was perhaps the most interesting part of the press release. The company said because the value of Tesla stock has increased considerably since 2009, Musk owes a bundle — $600 million to be specific — to Uncle Sam and the state of California. That’s why he has to sell shares. “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,” the company said in a statement. “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.”