Tesla to raise $1.4 billion for Model 3 production

Electric automaker Tesla Motors said Wednesday it would seek to raise $1.4 billion to $1.7 billion in a stock offering to fund the production of its mass-market electric car and accelerate its production expansion.

Tesla shares fell 7% in after-hours trading before recovering. They closed up 3% Wednesday to $211.17.

The company said it would use the funds to ramp up production of the Model 3, its first model aimed at the mass market, which CEO Elon Musk has said will begin in late 2017.

The Model 3 represents a significant logistical, financial and technological hurdle for Tesla. But the company said in a public filing Wednesday that it is accelerating its plans to build 500,000 vehicles annually. Previously, it projected it couldn't sell that number until 2020. Now, it says it plans to hit the target by 2018.

Analysts have expressed skepticism in the past about the automaker's ability to ramp up manufacturing after its struggles to increase the pace of production for the low-volume Model X crossover.

Tesla will sell 6.8 million shares, or up to 8.24 million if underwriters exercise their options, at an estimated $204.66 per share.

The company was widely expected to raise cash to pay for the Model 3. The company said in a public filing that it "may also use a portion of the net proceeds" for "working capital and other general corporate purposes."

Musk himself will exercise options to acquire 5.5 million shares in connection with the offering. He will sell 2.8 million and donate 1.2 million to charity, but his share of the company will increase, according to a filing.

Despite a sluggish pace of production on the Model X, Musk has pledged a quick rampup on the Model 3 after the automaker was deluged with refundable deposits for the electric sedan.

The company had about 373,000 deposits on the Model 3 as of Sunday, according to a public filing.

"If we wanted to, we believe that we could further increase the number of Model 3 reservations with minimal effort but believe it is better to guide customers to purchase products currently in production," Tesla said.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.