UBS Remains Cautious On Tesla Following $2B Offering

Shares of Tesla Motors Inc TSLA rallied more than 8 percent over Thursday's intraday session, up from a Wednesday post-market low at $198.01 to close at $215.21 Thursday. The price action followed news of a $2 billion offering aimed at ramping Model 3 production.

UBS analyst Colin Langan offered his thoughts on the offering.

"The capital raise is consistent with Q1 comments that the company would require some additional capital for the ramp. This would dilute shares by ~6% with the option (~5% without)," Langan suggested. The analyst highlighted total proceeds from the offering as about $1.7 billion, inline with his prior expectation for about $2 billion in proceeds.

"After the TSLA offering and exercise of Musk's options, the common stock outstanding after this offering will be ~147.6m with underwriter option (~146.2m without)," Langan said.

The UBS analyst said he remains cautious on Tesla for three reasons:

• the aggressive production ramp;
• Model 3 profitability; and,
• TSLA Energy demand.

UBS and Langan maintain a Sell rating and $160 price target on Tesla shares.