Tesla sets $242 offering price, raises number of shares

Luxury electric-car maker Tesla Motors (NASDAQ:TSLA) will pocket $642.5 million in a stock offering to accelerate production of its upcoming Model 3, the development of its Gigafactory battery plant, and the expansion of its car-charging network.

After the news circulated the market, Tesla stock is current trading higher 2.82% at $244.88 as of 10:55 AM EDT.

With the initial 500M offer, Tesla would have made about $565M if the underwriters exercise an option to purchase more shares.

We think so – Tesla is a good buy at $242….however, the stock with continue to be volatile, with an upward bias. During an earnings call with analysts last week, Chief Executive Officer Elon Musk said the company may raise equity capital “as a risk-reduction measure”.

Musk has been candid about Tesla’s need for capital spending and its lack of profitability.

The carmaker said on Thursday it would sell 2.1 million shares.

Worries about costs and competition have weighed on Tesla, which has been burning through cash to expand its business. Tesla in recent years has steadily increased revenue but has also produced a string of quarterly losses. If the said underwriters do purchase all the shares, the proceeds will be used to develop the Model 3, a cheaper electric auto, and also develop the Nevada factory besides spreading the retail operations. Fisker had issues with the vehicle’s batteries, which were ordered recalled. Tesla told shareholders this month that it now has 487 Supercharger stations globally and is opening one nearly every 24 hours. Tesla’s highly anticipated third vehicle, the Model X SUV, will go on sale in September.