Tesla shares have surged 81% from the company’s Aug. 11 stock-split announcement and have more than quintupled this year.
Amid Tesla’s incredible rise that has seen shares soar to new highs, the electric auto maker said Tuesday it will sell up to $5 billion in new stock.
The additional shares will be sold “from time to time” and “at-the-market” prices, Tesla said in a filing with the Securities and Exchange Commission. It said banks will sell shares based on directives from Tesla.
“We intend to use the net proceeds, if any, from this offering to further strengthen our balance sheet, as well as for general corporate purposes,” Tesla said.
The stock was about 4% lower during the first few minutes of trading on Tuesday, then regained some of the losses.
The decline hardly dents shares’ rapid appreciation this year. Through Monday’s close, the electric car maker has gained nearly 500% in 2020. In the last year, shares have gained 1,004% compared with the S&P 500’s 20% rise.
Tesla’s market cap now stands around $464 billion meaning the new offering represents about 1% of the company’s value, according to FactSet.
Wedbush analyst Daniel Ives wrote in a note to investors Tuesday that the timing of the equity offering is good in order to shore up the Palo Alto, California, company’s balance sheet. There is strong demand from investors at present to buy Tesla after a huge rally, he wrote.
CEO Elon Musk is “raising enough capital to get the balance sheet and capital structure to further firm up its growing cash position and slowly get out of its debt situation,” Ives wrote. The added capital “throws the lingering bear thesis for Tesla out the window for now,” he added.
Goldman Sachs, Bank of America, Barclays, Citigroup, Deutsche Bank, Morgan Stanley, Credit Suisse, SG Americas, Wells Fargo and BNP Paribas are listed as the sales agents for the offering.