Tesla plots US$2 billion offering as Musk seizes on stock surge

Marco Green
February 13, 2020

Tesla disclosed the new investigation as it announced a surprise $2bn (£1.53bn) stock offering to take advantage of its surging share price. The potential circa 2.65m shares is only around 1.5% dilutive to the share count.

Tesla's shares fell as much as seven percent in premarket trading after having tripled since October when the company posted a rare quarterly profit.

Chief Executive Officer Elon Musk has repeatedly assured investors that the United States-based company will not need to raise more money. Its market capitalisation is now worth more than the value of General Motors Co and Ford Motor Co combined. Musk said the company would generate enough cash on its own to fund ambitious expansion plans. "Diluting the company to pay down debt doesn't sound like a wise move".

The rear wheel drive (RWD) Long Range Model 3 was one of the original configurations available when Tesla first introduced the ground-breaking electric auto in the USA for order in 2016. As recently as last month, Musk said: "It doesn't make sense to raise money". It said it planned to use the cash to "further strengthen its balance sheet, as well as for general corporate purposes". The run has been fueled in part by Tesla's stronger-than-expected earnings for the end of 2019 and a profit at the battery factory the company runs with Panasonic. Tesla reported US$1.33 billion of expenditures for all of past year, well below its initial plan for as much as US$2.5 billion.

In a note last week, Tesla bull Gene Munster of Loup Ventures commented that Tesla stock may have risen too fast and presents short-term risk resulting from a sequential decline in deliveries (the first quarter is slow for all automakers), Tesla's still-negative free cash flow and margin pressure due to fewer deliveries and rising production ramps, among other things.

Goldman Sachs and Morgan Stanley are the lead joint book-running managers.

The underwriters of the offering will also have a 30-day option to buy up to approximately $300m of additional common stock.

Other reports by Click Lancashire

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