Tesla Shows How To Run A Secondary Offering, With Insider Buying (TSLA)

Energy

Published: May 25, 2011 11:39 am

Last Updated: May 25, 2011 11:40 am

Tesla Motors, Inc. (NASDAQ: TSLA) is bucking a trend. The company has just announced a follow-on offering of 5.3 million shares of common stock. Amazingly, the shares rallied on the news because of an insider purchase of shares. What appears to be helping shares today is that all of the shares being sold are being sold by the company. This is no insider cash-out stock sale. In fact, CEO and co-founder Elon Musk is buying shares concurrently.

The report noted that Elon Musk will purchase 1,500,000 shares of common stock directly from Tesla at the public offering price. On top of that, Daimler AG’s Blackstar Investco unit will purchase “up to approximately 644,475 shares” directly from Tesla at the public offering price.

What is interesting is that the only underwriter is Goldman Sachs. The company said that it intends to use a portion of the net proceeds to fund the development of its Model X crossover vehicle.

Shares of secondary offerings usually tank a stock. When a CEO and a key business partner announce that they are also buying direct stock to increase ownership, that often changes the game. Tesla shares are up 4.6% at $27.95 on more than 2 million shares after about two hours of trading.

JON C. OGG

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