8-KMaterial AgreementsFinancial EventsSecurities & Listing+2

Tesla, Inc. 8-K Report, Material Agreement (May 8, 2019)

Filed May 8, 2019For Securities:TSLA

Summary

On May 7, 2019, Tesla, Inc. (TSLA) announced the closing of its previously announced underwritten public offerings, raising significant capital through the sale of common stock and convertible senior notes. The company sold approximately 3.55 million shares of common stock and $1.84 billion in aggregate principal amount of 2.00% Convertible Senior Notes due May 15, 2024. These offerings are a key development for Tesla, providing substantial funding. The convertible notes have a conversion price of approximately $309.83 per share and are subject to specific conversion triggers and conditions. In connection with these offerings, Tesla also entered into note hedge and warrant transactions to manage potential dilution and cost associated with the convertible notes. Investors should note the terms of these financial instruments and their potential impact on future share count and equity value.

Key Highlights

  • 1Tesla closed an underwritten public offering of approximately 3.55 million shares of common stock on May 7, 2019.
  • 2The company also raised $1.84 billion in aggregate principal amount of 2.00% Convertible Senior Notes due May 15, 2024.
  • 3The convertible notes have an initial conversion price of approximately $309.83 per share.
  • 4The notes are convertible under specific conditions related to stock price, trading price, and corporate events.
  • 5Tesla entered into note hedge transactions to mitigate potential dilution from the convertible notes.
  • 6Additional warrant transactions were executed, allowing counterparties to purchase up to ~1.5 million shares of common stock at $607.50 per share.
  • 7The company incurred costs for the note hedge transactions ($475.8 million total, including $62.1 million for additional hedges) and received proceeds from warrant sales ($174.4 million total, including $22.8 million for additional warrants).

Frequently Asked Questions

The primary purpose of these offerings was to raise significant capital. Tesla sold common stock and convertible senior notes to bolster its financial position and fund its operations and growth initiatives.

The notes bear interest at 2.00% per year, payable semi-annually, and mature on May 15, 2024. They are convertible into Tesla common stock at an initial rate of 3.2276 shares per $1,000 principal amount, equivalent to an initial conversion price of approximately $309.83 per share. Conversion is subject to specific conditions, including stock price performance and corporate events.

Tesla entered into 'note hedge' transactions, which are essentially call options, to offset the potential increase in the number of shares outstanding if the stock price rises significantly and the notes are converted. Additionally, they sold warrants, which could lead to dilution if the stock price exceeds the strike price ($607.50 per share) and the warrants are exercised.

Tesla paid approximately $475.8 million for the note hedge transactions and received approximately $174.4 million from the sale of warrants. These transactions are designed to manage the financial and dilutive effects of the convertible notes.