Tesla to Sell Up to $5 Billion in Stock -- 2nd Update
September 01 2020 - 2:39PM
Dow Jones News
By Dave Sebastian
Tesla Inc. said it planned to raise up to $5 billion through
stock offerings from time to time as the electric-vehicle maker,
which has enjoyed a surging share price, makes another investment
push.
The return to capital markets comes after the stock split
5-for-1 on Monday, sending it up 13% to $498.32. The planned
fundraising represents roughly 1.1% of Tesla's $464 billion market
capitalization, according to FactSet.
Tesla has enjoyed a strong run despite the pandemic that
temporarily shut its lone U.S. car plant in Fremont, Calif., as
local authorities battled the spread of the Covid-19 disease. In
July, the company posted a fourth-consecutive profitable quarter
for the first time in its 17-year history, defying Wall Street
analysts who expected a loss. But reaching that point hasn't been
easy. In its quest to become the first mass producer of electric
cars, it burned cash to raise production and overcome logistical
hurdles.
Tesla, which had about $8.5 billion in debt at the end of the
latest quarter, has at times struggled with a lack of liquidity,
particularly during expansion periods when it introduced new models
and added production capacity.
The Silicon Valley car maker in July said it was planning to
open a second U.S. car factory to be located in Austin, Texas, with
production slated to start next year. The company already is
working on its first European car plant outside Berlin and has
signed a loan agreement with Chinese banks to expand its car plant
in Shanghai.
Tesla, which this year began delivering its Model Y
sport-utility vehicle, also is working on several new vehicle
types, including its Cypertruck pickup and Semi truck.
David Whiston, an analyst for Morningstar Research, said there
will likely be many more factories requiring heavy capital
spending, and with the run-up in its stock Tesla can tap what
almost amounts to free money.
The shares have risen nearly sixfold this year, including a
roughly 80% rise since the company's stock-split announcement on
Aug. 11.
Raising capital over time is a good way to involve retail
investors, Craig Irwin, senior research analyst at Roth Capital
Partners LLC, said. "They're going to sell $5 billion of their
stock into the open market from time to time for a much smaller fee
than they would if they sold straight equity in a secondary
[offering]."
Millions of Americans are actively trading the markets during
the Covid-19 pandemic. Individual investors have piled into pricey
yet popular stocks like Tesla through fractional-share trading.
The electric-vehicle maker in February raised more than $2
billion from a stock sale to help bolster its balance sheet. Chief
Executive Elon Musk, who is the largest owner of Tesla stock, has
had a complicated relationship with fundraising. With a showman's
flair, he has been successful in drumming up investor enthusiasm in
Tesla, while also expressing a reluctance to issue stock over
concerns it would dilute value for existing shareholders.
The car maker's shares fell about 2.8% to $484 in afternoon
trading after the company said it would issue more shares.
The company on Tuesday said it has entered an equity
distribution agreement with Goldman Sachs & Co., BofA
Securities Inc., Barclays Capital Inc., Citigroup Global Markets
Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co.,
Credit Suisse Securities (USA), SG Americas Securities, Wells Fargo
Securities and BNP Paribas Securities Corp.
Those banks, which will act as sales agents, will get a
commission of up to 0.5% of gross proceeds from each sale of Tesla
shares, as well as reimbursement for certain expenses. The company
said it could terminate the agreement at any time.
Write to Dave Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
September 01, 2020 14:24 ET (18:24 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Tesla (NASDAQ:TSLA)
Historical Stock Chart
From Aug 2024 to Sep 2024
Tesla (NASDAQ:TSLA)
Historical Stock Chart
From Sep 2023 to Sep 2024