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Tesla To Sell $2 Billion In Stock; 12,000 Model 3 Orders Cancelled
Electric automaker Tesla ( TSLA ) said late Wednesday that it will make a $2 billion secondary stock offering to fund its ambitious production schedule. Meanwhile, Tesla also said it has 373,000 Model 3 orders after cancelling about 12,000 reservations. “Because of the overwhelming demand that it has received for Model 3, Tesla intends to use the net proceeds from this offering to accelerate the ramp of Model 3,” said Tesla’s press release. “As noted in the company’s first-quarter shareholder letter , Tesla intends to start volume production and deliveries of Model 3 in late 2017 and to accelerate its 500,000 unit build plan from 2020 to 2018.” The company said $1.4 billion worth of stock will be sold by Tesla for this purpose. The remaining $600 million will be raised by CEO Elon Musk, who is exercising his option to acquire 5.5 million Tesla shares and will use the sale to cover his tax bill, the company said. He’s also donating 1.2 million shares to charity. Tesla said it had some 373,000 orders for the entry-level luxury Model 3 as of May 15. That’s after customers cancelled about 8,000 orders and the automaker cut some 4,200 orders that were likely duplicates. Tesla had said previously that it had about 400,000 orders. “If we wanted to, we believe that we could further increase the number of Model 3 reservations with minimal effort, but believe it is better to guide customers to purchase products currently in production,” Tesla said in an SEC filing. Tesla stock fell sharply in initial after-hours action, dropping below 200. But shares steadily improved and were recently fractionally higher. In the regular session in the stock market today , Tesla rose 3.2% to close at 211.17, boosted by Goldman Sachs’ upgrade earlier in the day. Goldman upgraded the stock despite expressing deep skepticism about the 2018 production target, but the investment bank said the stock is attractively priced after falling 23% from early April through Tuesday.
Here’s Why Apple Should Be More Like Netflix
Loading the player… Amid slowing iPhone sales, Apple ( AAPL ) should take a page from Netflix’s ( NFLX ) playbook and go with the subscription model, according to a Bernstein report out Wednesday. With the cost of owning and using an iPhone averaging at about $3 a day, Bernstein says Apple could offer its products to customers as a bundled monthly service instead of single purchases of more than $700 every few years. The analyst believes customers could get more services from an Apple subscription bundle at a cheaper cost than their Internet and cable bills. Apple shares closed up 1.2% in above-average volume after testing support at the 10-day line in Tuesday’s session. The stock still has a lot of recovering to do after crumbling to its lowest level in nearly two years just last week, in the wake of the company’s disappointing quarterly earnings report. Apple is 28% below its all-time high reached in April 2015. Meanwhile, Netflix is looking to retake its 10-day line, an area the stock has struggled to stay above in the aftermath of its disappointing Q2 subscriber addition guidance about a month ago. Shares are trading 32% below their all-time high reached last December, but finished 2.1% higher Wednesday. Another big tech company benefiting from the subscription model is Amazon ( AMZN ). The e-commerce giant’s Amazon Prime service costs $99 dollars a year and is growing in popularity. Amazon also recently rolled out a monthly Prime membership for $10.99 a month and a video-only subscription for $8.99 a month. Amazon is looking for support at its 10-day line. The stock tried to climb back above the 700 price level in intraday trade but reversed lower by the afternoon, then ended up 0.3% at 697.45. Shares are 3% below their all-time high reached last week and extended 16% past a cup-with-handle buy point it initially cleared just a few weeks before the company’s latest quarterly report.