Tesla just announced Its plans to raise $2 billion through a common stock offering.
According to the securities filing, Tesla wants to use the funds mainly to boost its balance sheet.
Tesla CEO Elon Musk will purchase up to $10 million in shares in the offering, while Oracle co-founder and Tesla board member Larry Ellison will buy up to $1 million worth of Tesla shares,
Tesla could raise as much as $2.3 billion through granting underwriters a 30-day option, which will allow underwriters to buy as much as $300 million of additional common stock.
Before this news, Tesla stock briefly nosedived as much as 4.2% in early trading and fell as much as 7.2% in premarket trading, before recovering to trade 0.7% higher in morning trading.
What Analysts Are Saying
CFRA analyst Garrett Nelson: “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”
Baird analyst Ben Kallo: 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. “Importantly, we think the announcement could provide an opportunity for analysts to close out sell ratings and expect shares to trade up in the short term,”
Wedbush analysts Dan Ives: The offering will be a bit of a shock to some given the company talked about no need to raise capital on its recent conference call, but it rips the Band-Aid off and takes the doomsday cash crunch scenario some predicted down the road now off the table. The size of this offering is larger than many had anticipated, but we believe it’s a smart move by Musk and the Board to take advantage of being back in a position of strength with the Street and focus on raising capital.