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Published: Sun, March 19, 2017
Science | By Guadalupe Butler

Tesla Model S discontinued, might make way for the Model 3

Tesla Model S discontinued, might make way for the Model 3

After burning through cash late last year and Musk's warning to Wall Street that the company coffers were "close to the edge", Tesla announced on Wednesday that it would sell new stock and convertible securities while preparing for volume production and deliveries of its first mass-market vehicle later this year.

In addition to an increase in the common stock offering, Tesla also raised $850M from a convertible debt sale with an additional $127.5M available to the underwriters.

According to the proposed plan, Tesla will produce around 5000 of Model 3 vehicles per week, which suggests that it would take the company ample time to deliver it to all customers.

Goldman, Sachs & Co., Deutsche Bank Securities, Citigroup and Morgan Stanley are acting as lead joint book-running managers for the offering, with Barclays, BofA Merrill Lynch and Credit Suisse acting as additional book-running managers. The total amount includes $350 mtillion in share sales, plus $850 million raised via the senior notes, which is a bit north of what it announced on Wednesday it was planning to raise. This capital raise is meant to "de-risk" the company's financial condition as they focus on getting the Model 3 into production this year. According to reports, the Model Y will be a crossover vehicle and will be priced slightly higher than the Model 3's $37,000 price tag. The company could be spending "tens of billions" in the long run to reach that production level, but would only need a "modest" capital raise to offset it.

Tesla shares were up 0.3 percent at $262.71 before the market opened Friday, and hovered around $263 late in the day. In a shareholder letter issues last month, the company noted that it expects "to invest between $2 billion and $2.5 billion in capital expenditures ahead of the start of Model 3 production".

If the company manages to do what it says, then it will surely provide a much more convenient process for consumers.

In addition, Tesla is already making plans to launch/unveil the Model Y at some point next year.

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