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Tesla shares down on bigger stock and note sales

NEW YORK (AP) -- Tesla Motors shares fell Friday as the electric car maker increased the size of its stock and note sales by nearly 17 percent.

THE SPARK: Tesla disclosed in a regulatory filing that it now plans to sell 3.39 million shares in a public offering, and has priced them at $92.24 each, according to the filing with the Securities and Exchange Commission. Thursday's closing price was $92.25.

The company also said it will pay 1.5 percent interest annually on $600 million in senior convertible notes that it plans to sell. The notes come due on June 1, 2018. Tesla previously said it would sell 2.7 million shares and $450 million in senior notes.

The company expects $968 million in gross proceeds from the sales and plans to use $452.4 million to prepay a loan it received from the Department of Energy. Tesla CEO Elon Musk has promised to pay off the $465 million, 10-year loan early. The company intends to use the rest of the proceeds for costs related to its debt sale and general corporate purposes, the filing said.

THE ANALYSIS: Morgan Stanley analyst Adam Jonas said in a client note that paying off the loan early may enhance Tesla's reputation with the public and help it sell more cars. He added that getting rid of the covenants and other restrictions tied to the loan also gives the company more financial and operational flexibility.

Jonas raised Tesla's price target to $109 from $103 and made it his new top pick in U.S. auto companies. He rates it "Overweight."

A representative for Tesla did not immediately respond to an email seeking comment.

SHARE ACTION: Down $2.31, or 2.5 percent, to $89.94 in afternoon trading. The shares have traded in a 52-week range of $25.52 to $97.12.