Tesla will sell stock to cover expansion costs

Tesla Motors plans to sell about $1.4 billion in stock to help pay for an expansion that includes its Model 3 car and boosting annual production to 500,000 vehicles in 2018.

The total stock sale will be about $2 billion, with the remainder of the shares to be sold by chief executive officer Elon Musk to cover tax obligations on stock options he is exercising, the company said Wednesday.

Tesla faces a sharp rise in spending for its production plan, which includes as many as 200,000 of its Model 3 cars by the second half of next year, as well as to complete its battery factory in Nevada, expand sales and service globally, and add charging stations.

For this year, capital expenditures will increase about 50 percent, or $750 million, from the company’s original budget, Musk said on a first-quarter earnings conference call on May 4.

“It’s going to make sense for us to raise some amount of money, some combination of equity and debt, and make sure the company has a good buffer of cash on hand,“ Musk said on the call.

The company had $1.44 billion in cash and equivalents at the end of the first quarter, up from $1.2 billion at the end of 2015.

This story was originally published May 18, 2016 at 4:26 PM with the headline "Tesla will sell stock to cover expansion costs."