Tesla raises up to $1.4 billion to help build Model 3 electric vehicle

Making electric vehicles is expensive.

Tesla raised about $1.2 billion in fresh capital through a sale of stock and issuance of new debt Thursday as the company readies for production of its first mass-market electric vehicle.

The Palo Alto, Calif.-based manufacturer sold stock at $262 per share, totaling nearly $350 million in proceeds, and issued convertible notes worth $850 million, according to a document filed Friday with the Securities and Exchange Commission.

The deal is expected to help pave the way for the Model 3 electric vehicle, which the company has maintained will hit production in July despite skepticism among analysts.

The transaction could be worth as much as $1.4 billion to Tesla if underwriters Goldman Sachs, Deutsche Bank, Citigroup, Morgan Stanley, Barclays, Merrill Lynch and Credit Suisse exercise all their options.

The deal slightly exceeded Tesla's previous estimate of $1 billion to $1.1 billion.

Tesla shares rose slightly in pre-market trading Friday, up 0.3% to $262.95.

As expected, CEO Elon Musk personally bought $25 million in Tesla shares in the offering, according to the filing. The move is viewed as a gesture of faith in the company's prospects because some stockholders view a capital raise as dilutive to their investments.

Tesla said in the filing that the deal was designed "to strengthen its balance sheet and further reduce any risks associated with the rapid scaling of its business due to the launch of Model 3, as well as for general corporate purposes."

The company told investors in a recent letter that it expects to hit a production rate of 5,000 Model 3 vehicles per week "at some point in the fourth quarter" and 10,000 per week "at some point in 2018."

The basic version of the vehicle is expected to cost less than $30,000 after tax credits, although most early versions sold to consumers will have more expensive options.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.