By Sagarika Jaisinghani and Arunima Banerjee

(Reuters) – Tesla Motors Inc CEO Elon Musk will invest $20 million as part of the company’s $500 million stock offering in a show of confidence at a time when the electric car maker is burning through cash.

Tesla said on Thursday it would use the proceeds from the sale to help fund its upcoming Model 3 project and its battery gigafactory in Nevada. (http://bit.ly/1TuIQJa)

The company’s shares rose 3 percent in morning trading.

Musk is telling the market “I’m putting my money where my mouth is”, Jefferies & Co analyst Dan Dolev said. “He did it so he kind of shows that he leads by example.”

The offering of 2.1 million shares, Tesla’s first equity sale in more than two years, comes a week after the company reported a larger quarterly loss and said it may raise more cash to offset heavy spending.

Up to Wednesday’s close, Tesla’s shares had fallen 12 percent since Aug. 5 when it reported its results.

Tesla, which has been losing more than $4,000 on every Model S electric sedan it sells, had $1.15 billion in cash and equivalents as of June 30, down from $1.91 billion as of Dec. 31.

The company said in a filing that it assumed the shares would be priced at Wednesday’s closing price of $238.17. The stock is expected to be priced after the market closes.

Musk, who is buying about 84,000 shares in the offering, is already the company’s largest shareholder with a 22.25 percent stake as of Dec. 31, according to Reuters data. On that basis, the latest purchase will slightly reduce his holding.

Tesla had 127.1 million shares outstanding as of July 30.

The company has said its Model 3 vehicle, which will compete with BMW’s 3 Series sedans, will go on sale in 2017.

The offering’s underwriters have a 30-day option to buy up to $75 million of additional shares, Tesla said.

Goldman Sachs & Co and Morgan Stanley are lead joint book-running managers for the offering, while J.P. Morgan and Deutsche Bank Securities are additional book-running managers.

BofA Merrill Lynch and Wells Fargo Securities are co-managers.

(Reporting by Sagarika Jaisinghani and Arunima Banerjee in Bengaluru; Editing by Sweta Singh and Ted Kerr)