Only a few weeks after CEO Elon Musk said “it doesn’t make sense”, Tesla has announced a new stock offering worth $2 billion. This was, of course, before Tesla stock rose to above $700 per share.
In a Q4 earnings call in January, Musk was questioned about whether he’d be interested in raising more capital using its high stock price. He was against the idea in his reply:
“Well, we’re actually spending money as quickly as we can spend it sensibly. So if there’s any sensible way to spend money, we’re spending it. There is no artificial hold back on expenditures. Anything that I see that is what looks like it’s got good value for money, the answer is yes immediately. But we’re spending money I think efficiently and we’re not artificially limiting our progress. And then despite all that we are still generating positive cash. So in light of that, it doesn’t make sense to raise money because we expect to generate cash despite this growth level.”
Since then, Tesla has announced a new stock offering of 2.65 million shares that would raise over $2 billion for the tech company.
Tesla made the following statement when they filed this with the SEC:
“We intend to use the net proceeds from this common stock offering to further strengthen our balance sheet, as well as for general corporate purposes. Pending use of the proceeds as described above, we intend to invest the proceeds in highly liquid cash equivalents or United States government securities.”
The value of the stock is expected to sit between $2 billion and $2.31 billion approximately.
“We expect to receive net proceeds from this offering of approximately $2.01 billion (or approximately $2.31 billion if the underwriters exercise their option to purchase additional shares in full) after deducting the underwriting discounts and our estimated offering expenses. The estimated net proceeds are based on the assumed public offering price of $767.29 per share, which was the last reported sale price of our common stock on February 12, 2020.”
Tesla CEO Elon Musk, alongside Larry Ellison, is expected to buy $10 million and $1 million worth of shares respectively.
The reason behind this move isn’t so crystal clear, as we highly doubt it’s just for ‘the balance sheet’. we expect there are plans afoot. This could possibly be another factory, a boost in funds for the Cybertruck, or maybe even the purchasing of a mining company, that was also recently hinted at during an earnings call. Whatever this may be, we’ll be excited to see what happens with the extra cash.