Tesla Raises Secondary Offering To 2.7 Million Shares, Stifel Says 'Net-Net A Positive'

Recent SEC filing by Tesla Motors Inc TSLA shows that the company has boosted its secondary offering to 2.7 million shares from 2.1 million shares reported earlier. The maximum offering price for these shares has been set by the company at $242.
James Albertine, Stifel Equity Research director, was on CNBC Friday to weigh in on this secondary offering by Tesla and its cash burn.

Cash Burn

Albertine was asked about the rapid rate at which Tesla is burning its cash and isn't the company leaving a lot of cash on the table by pricing its secondary offering at $242 especially when he has a price target of $400 on the stock. He replied, "As you think about sort of the cash burn, remember the peak investment phase of any auto manufacturer is right before a vehicle comes to launch, they are effectively bringing on an entirely new body assembly line to support the Model X launch. And the paint and again the sort of the general assembly expenditures don't happen till right before the vehicle hits.

$400 P.T. Based On Fully Baked Model S, Model X Launch

He continued, "As it relates to the target price and the dilution from the share allotment,...2.7 million includes the underwriters additional allocation as we understood from yesterday. But nevertheless $400 is also based on sort of a fully baked Model S, Model X launch to the degree that we feel more comfortable."

"And they are achieving that rate and that they have the cash flow to support the investments there, I would say this is net-net a positive. And I think that's how some investors are viewing it particularly yesterday as the stock was higher," Albertine said.