Tesla Inc. plans to sell as much as US$5 billion of shares, capitalizing on its high-flying price and on a recent stock split that made it more accessible to individual investors.
The electric-car maker will sell the shares “from time to time” through an agreement with several banks, according to a regulatory filing. The Palo Alto, California-based company plans to use the proceeds to strengthen its balance sheet and for general corporate purposes.
Tesla is raising money while it expands with new factories going up in Germany and Austin, Texas, following the recent completion of a plant in Shanghai. It’s a pivotal time for the manufacturer, which faces more competition from established automakers and startups alike aiming to chip at its lead in electric-vehicle sales.
The plan is a form of “weaponizing” Tesla’s cheap cost of capital, Evercore ISI analysts Chris McNally and John Saager wrote in a research note published Tuesday.
The new program could be the largest equity raise ever for Elon Musk’s company if it sells at least US$2.34 billion under the plan. Until now, Tesla had raised about US$14 billion over the past decade through secondary stock offerings, most recently in February. The sales have helped bolster cash during its transition from a niche electric-car maker to the mass market.
Tesla shares fell 3.2 per cent to US$482.44 as of 9:52 a.m. in New York. The stock has climbed almost 500 per cent this year, accounting for the five-for-one stock split that became official Aug. 31, and in the process made Musk the world’s third-richest person.
As of last September, US$5 billion would have represented a significant portion of Tesla’s market capitalization, which dipped just below US$40 billion at the time. Today it is about 1 per cent of the US$460 billion market value, which exceeds that of Toyota Motor Corp. and Ford Motor Co. combined.
Tesla had about US$8.6 billion of cash and equivalent as of June 30.
Banks in the US$5 billion program include Goldman Sachs Group Inc., Bank of America Corp., Barclays Capital Inc., Citigroup Inc., Deutsche Bank AG, Morgan Stanley, Credit Suisse Group AG, SG Americas Securities, Wells Fargo & Co. and BNP Paribas SA.
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