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Ahead of the Bell: Tesla Motors gain on debt plans

The Associated Press

Shares of Tesla Motors Inc. shot higher in premarket trading on Thursday after it said it would offer stock and notes in an $830 million deal that will allow it to pay down its debt to the U.S. government.

The electric car maker last week reported its first profitable quarter since its founding in 2003, and its Model S has brought some acclaim. But its new technology is up against a lack of charging stations across much of the U.S., and pricey cars that are out of the price range for most car buyers.

Palo Alto, Calif.-based Tesla said it will offer 2.7 million shares of its common stock and $450 million in convertible senior notes. The company has also given underwriters the option to buy another 405,454 shares of stock and $67.5 million in notes.

CEO and co-founder Elon Musk plans to buy $100 million worth of shares at the same public offering price. About $45 million will be purchased in the offering and $55 million will be purchased directly from Tesla. He currently holds about 27 million shares, nearly 24 percent of the company's outstanding stock.

Tesla said it will use the money towards repaying, with interest, the $465 million loan it got from the Energy Department to develop zero-emissions cars.

Tesla shares finished 2012 at $33.87, and they've rocketed this month as its finances appeared to improve. They closed on Wednesday at $84.84. In premarket trading on Thursday they were up $8.72, or 10.3 percent, to $93.56.

Tesla's rapid stock price rise has some skeptics. Deutsche Bank raised its target price — but only to $50, from $35, and kept a "Hold" rating on the stock. A note from the firm said the target price implies a 14 percent pre-tax margin on 40,000 cars sold. That's a little higher than the premium assigned to Porsche during its rapid growth in the early 2000s, the note said.

However, Morgan Stanley analyst Adam Jonas reiterated his "Overweight" rating and raised his price target to $103, from $47. "What Tesla has accomplished isn't luck, it's real," he wrote on Wednesday after the share sale announcement.