With its recent success and growth in manufacturing the new Tesla models, the company plans to fuel its growth further by raising $2.3 billion from the open market through common stock offerings. Tesla (TSLA) stock price is moving up again.
On Thursday, February 13, Tesla announced that it plans to offer $2 billion worth of common stock options to investors. This news comes just at a time when the Telsa stock has created a massive buzz in the market.
Since the start of 2020, Tesla (TSLA) share price is up by over 85%. The massive rally in the Tesla stock came after the company announced its Q4 2019 results beating street expectations. With Tesla manufacturing capabilities getting more robust, analysts are expecting a bright future for the electric car maker.
The press release states that the offering can bring an additional $2.3 billion cash infusion to the company. With Tesla’s increased rate of production at its Shanghai Gigafactory, and sooner-than-expected delivery of its Model Y crossover, Tesla is predicting $3.5 billion in capital expenditures, so far in 2020. Additionally, the automobile giant is also working on setting up another gigafactory in Germany’s capital city of Berlin.
With the new stock offering, the press release also states that Tesla CEO Elon Musk will participate in purchasing $10 million worth of common stock. Similarly, Larry Ellison, one of Tesla’s Board of Directors will purchase $1 million worth of common stock.
Tesla’s 2020 rally has helped the company’s valuation inch closer to $150 billion. Besides, Tesla’s total market cap as on date is more than the combined market of General Motors, Ford, and Chrysler.
However, after Tesla announced the stock offering on Thursday, the TSLA share price slipped under $800. But by the end of the day, it managed to close at $800 just 0.50% dip. Earlier this month, due to the coronavirus outbreak in China, Tesla’s share showed a bit of volatility. However, the Shanghai municipal government assured the car marker of resuming its production soon as the matter gets under control.
Analysts Views on Tesla Stock Offering Move
Speaking to MarketWatch, Garrett Nelson, an analyst with CFRA, said:
“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.”
He further expressed his views stating that Tesla’s stock can continue its momentum ahead despite recent roadblocks. Nelson stated:
“Recent speed bumps including a coronavirus-related delay in vehicle deliveries from its new China factory and the Model X recall likely factored into management’s decision to proceed with the offering.”
On the other hand, Elon Musk also assured investors that the company is spending money wisely.
“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”, explained he.
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.