Musk Says Tesla Stock Surge Sparked Funding Boost, Payoff

May 23 (Bloomberg) -- Call it Elon Unchained. With the early repayment yesterday of Tesla Motors' loan from the U.S. Energy Department, CEO Elon Musk is free to run the electric-car maker for the benefit of himself and other shareholders. Musk speaks with Betty Liu on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Elon Musk, Tesla Motors Inc. (TSLA)’s chief executive officer and co-founder, said his realization the electric-car maker could retire its U.S. loan nine years early didn’t arise until Tesla shares unexpectedly surged this month.

The carmaker, based in Palo Alto, California, yesterday paid the Energy Department $451.8 million left on an Advanced Technology Vehicles Manufacturing loan awarded in 2009 to develop and build Model S sedans. Repayment funds were raised from a $1 billion share and debt sale, $300 million more than the company initially thought it could get, Musk said.

“We literally had done no work on this until the day after our earnings call” on May 8, Musk said in a phone interview from Washington yesterday. “We worked through the weekend, worked with the bankers and put together the financing round and were quite pleasantly surprised by the level of demand.”

Fortunes have changed swiftly for the carmaker named for inventor Nikola Tesla. After 10 quarters of losses since a June 2010 initial public offering and an unfavorable New York Times story in February questioning the range of Model S, Tesla reported its first quarterly profit this month, raised its shipment goal for the year and saw its market value soar to more than $10 billion, bigger than that of Fiat SpA. (F)

‘Well Received’

The company on May 15 said it would raise $830 million from selling shares and convertible bonds, and then boosted the goal to as much as $1.08 billion on May 17.

“We started off looking to raise around $700 million,” said Musk. As recently as May 2, he said in an interview that Tesla wouldn’t seek additional funds soon.

“I thought it would be quite difficult to raise the capital for Tesla,” he said, citing a high degree of shorting of the company’s shares that had “compressed” the price.

Reporting a profit, followed by a favorable Consumer Reports magazine review of Model S helped push the shares up 65 percent from the May 8 close, before results were announced, to a record closing price of $92.25 on May 16.

“We said, ‘OK, we should take the opportunity to raise funding because there are times when the market is pessimistic and times when the market is optimistic, and you want to do it when it’s optimistic,’” Musk said. “We had no idea how well it would be received.”

No. 3

Separately, Tesla’s Model S, priced from $69,900, ranked third in sales among luxury sedans in California in the year’s first quarter, according to a report from the California New Car Dealers Association, citing R.L. Polk & Co. data.

Model S deliveries in the nation’s most populous state totaled 2,406 in the year’s first three months, according to the report.

Only Daimler AG’s Mercedes-Benz E-Class and Bayerische Motoren Werke AG’s BMW 5-Series surpassed Model S sales in California, according to the report.

Tesla’s volume in its home state in the quarter was 49 percent of the 4,900 cars it sold in the period in North America. Shipments of Model S to Europe start in July, with Asia-bound deliveries planned for late 2013, Musk said.

Tesla rose 6.3 percent to a record $92.73 at the close in New York. The shares have soared 174 percent this year, outstripping the 16 percent gain for the Russell 1000 Index.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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