Investor Alert

New York Markets Close in:

Feb. 18, 2020, 11:37 a.m. EST

Tesla jolts market with $2 billion stock offering, SEC subpoena

Separately, Tesla disclosed an SEC subpoena seeking information on some of its financing arrangements

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Tesla Inc. (TSLA)

or Cancel Already have a watchlist? Log In

By Ciara Linnane, Tomi Kilgore and Claudia Assis, MarketWatch


Bloomberg News/Landov

Tesla Inc. surprised the market Thursday with the news that it was planning to offer about $2 billion of common stock in an underwritten deal, but an initial negative reaction gave way to hopes it’s the right step considering the recent runup for the stock and the Silicon Valley car maker’s expansion goals.

The company priced the offering early Friday at $767 a share, a discount to the stock’s closing price Thursday of $804. The deal raised a total of $2.03 billion.

Tesla stock /zigman2/quotes/203558040/composite TSLA -0.82%  initially fell Thursday, before recovering to trade nearly 5% higher.

Chief Executive Elon Musk will participate in the offering by purchasing up to $10 million in new shares, Tesla /zigman2/quotes/203558040/composite TSLA -0.82%  said in a statement. Board member Larry Ellison will also participate by buying up to $1 million in stock.

Proceeds of the deal will be used to bolster the company’s balance sheet and for general corporate purposes. Goldman Sachs and Morgan Stanley are underwriting the deal and have a 30-day option to acquire another $300 million in stock.

Don’t miss: Famed short seller tells MarketWatch why he’s betting against Tesla’s ‘casino’

“We are not surprised by the capital raise considering (Tesla’s) ambitious growth plans, including a new factory in Germany and a possible factory in Texas,” and also in light of the stock’s run-up and the fact it last issued equity in May at $243 a share, said Garrett Nelson, an analyst with CFRA.

Tesla shares have been on a tear, more than doubling in just three months, repeatedly setting fresh records as analysts turn more bullish on the company.

“Recent speed bumps including a coronavirus-related delay in vehicle deliveries from its new China factory and the Model X recall likely factored into management’s decision to proceed with the offering,” he said.

Baird analyst Ben Kallo said the equity raise is about 2% dilutive to existing shareholders, but that the move was prudent given the recent run-up in the stock price.

/zigman2/quotes/203558040/composite TSLA 1,407.00, -11.57, -0.82%

Baird’s Kallo acknowledged, however, that issuing stock clashes with recent comments from the company, including from Musk on its last earnings call on Jan. 29.

“We’re spending money, I think, efficiently, and we’re not artificially limiting our progress,” Musk told analysts, according to a FactSet transcript. “And then, despite all that, we are still generating positive cash. So in light of that, it doesn’t make sense to raise money because we expect to generate cash despite this growth level.”

Read: Tesla shorts ‘trampled,’ face more than $1.5 billion in paper losses

The money will help fund Tesla’s future investment plans which include up to $3 billion of annual capital expenditures through 2022, said Kallo.

/zigman2/quotes/203558040/composite
US : U.S.: Nasdaq
$ 1,407.00
-11.57 -0.82%
Volume: 4.62M
Aug. 11, 2020 1:06p
P/E Ratio
734.46
Dividend Yield
N/A
Market Cap
$264.37 billion
Rev. per Employee
$439,627
loading...
/zigman2/quotes/203558040/composite
US : U.S.: Nasdaq
$ 1,407.00
-11.57 -0.82%
Volume: 4.62M
Aug. 11, 2020 1:06p
P/E Ratio
734.46
Dividend Yield
N/A
Market Cap
$264.37 billion
Rev. per Employee
$439,627
loading...
1 2
This Story has 0 Comments
Be the first to comment
More News In
Industries

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.