Tesla To Offer $5 Billion In Stock -- WSJ
By Dave Sebastian
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 2, 2020).
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
The return to capital markets comes after the stock split
5-for-1 on Monday, sending it up sharply. 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, Tesla burned cash to raise production and overcome logistical
The Silicon Valley car maker, 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 company 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. It 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 Cybertruck 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
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
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, which rose 13% on Monday, fell 4.7% to
$475.05 on Tuesday after the company said it would issue more
Tesla 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
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.
Corrections & Amplifications Tesla Inc.'s plans to raise up
to $5 billion in stock offerings from time to time represents
roughly 1.1% of Tesla's $464 billion market capitalization. An
earlier version of this article incorrectly said it was less than
1%. (Corrected on Sept. 1)
Write to Dave Sebastian at firstname.lastname@example.org
(END) Dow Jones Newswires
September 02, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Historical Stock Chart
From Nov 2020 to Dec 2020
Historical Stock Chart
From Dec 2019 to Dec 2020