Tesla is all set to raise $5 billion by the fresh stock offering as it plans new gigafactories and production expansion in the next two years. The fundraise plan comes at a time when the TSLA has skyrocketed nearly 700% so far in 2020.
As Tesla Inc (NASDAQ: TSLA) stock continues its rally, the electric carmaker and the world’s largest automobile company Tesla is planning to raise a whopping $5 billion through a common stock offering. This will be the third time that Tesla is raising money from the market this year in 2020.
Tesla said that the company will sell additional shares “from time to time” and “at-the-market” prices. Also, the filing with the US Securities and Exchange Commission (SEC) notes that the banks will sell shares after proper directives from Tesla. Tesla has inked a deal with banking giants like Goldman Sachs, Bank of America, Morgan Stanley, and 7 others for the stock sale.
On Tuesday’s closing, the TSLA stock was trading at a price of $649 valuing the company at $616 billion. Thus, the latest stock offering is actually less than 1% of the company’s valuations. The TSLA stock has grown by 8x this year making Tesla the most valuable automobile company on the planet. Interestingly, the company’s size is now so huge that Tesla’s valuations are more than the combined valuations of several other competitors.
Tesla has massive expansion plans ahead in 2021 and 2022. This includes building gigafactories in Texas and Berlin as well as expanding its battery cell manufacturing. Reportedly, Tesla plans to spend $2.5 billion for the next two years each. During the Q3 2020 earnings call, Tesla CEO Elon Musk said:
“We’re trying to spend money at the fastest rate that we can possibly spend it and not waste it. That’s our current plan. And so it’s quite hard to spend money without wasting it.”
Stock Offering Is a Smart Move by Tesla, Analysts Say
The latest decision to raise money from the market by liquidating the stock holding is a smart move by Tesla CEO Elon Musk. In a note to investors, Wedbush analyst Dan Ives wrote that the move for fundraising is “clear positive and further solidifies” the bull sentiment for the company.
“Now in a clear position of strength and out of the red ink with major factory build outs on the horizon (Austin and Berlin), Musk and his red cape are raising enough capital to get the balance sheet and capital structure to further firm up its growing cash position and slowly get out of its debt situation, which throws the lingering bear thesis for Tesla out the window for now,” he wrote.
The Tesla stock’s inclusion to S&P 500 ahead this month on December 21 is the reason behind its recent rally. Since the announcement, the TSLA share price has already surged nearly 60%.
With the TSLA stock rally, Elon Musk’s net worth has surged by an additional $100 billion this year making him the second-richest man after Jeff Bezos. However, the Tesla CEO himself feels that the stock price is overvalued at this stage. But Musk remains confident that Tesla could be worth much more five years from now.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
