Tesla will sell new shares for more than
Tesla will sell new shares for more than $2 billion
The company will sell 2.65 million common shares at a price 4.6% below Thursday's closing. According to the company, Tesla CEO Ilon Mask will buy shares for $10 million and Oracle billionaire Larry Ellison for $1 million.
Tesla (TSLA) shares declined after the company announced Thursday after the close of trading that it would sell 2.65 million common shares at $767 per share, which is 4.6% below the closing price on Thursday.
The secondary placement of Tesla shares will be conducted through the underwriters Goldman Sachs (GS) and Morgan Stanley (MS) with expected gross proceeds of $2.3bn net of discounts and costs.
Tesla said it plans to use the revenue "to further strengthen its balance sheet as well as for general corporate purposes".
According to the company, CEO Ilon Mask will buy shares for $10 million and Oracle billionaire Larry Allison will buy shares for $1 million. Allison disclosed his ownership of 3 million shares of Tesla when he joined the board in December 2018. Mask had previously acquired hundreds of millions of dollars in shares on several occasions.
Ben Silverman, research director at InsiderScore, described the $1 million acquisition of Tesla by Allison as "symbolic," and said that he believed the higher share price was a factor in the current small acquisitions of Allison and Mask.
"This speaks to the PR nature of the acquisition," he said.
As for the secondary placement itself, most analysts took the news positively, pointing out that raising capital is particularly relevant in the current environment. Commenting on the recent quarterly report, Tesla noted the negative impact of the deadly coronavirus in China. The epidemic forced the company to suspend operations at its Shanghai plant and close all its stores in China. In addition, Tesla plans to build a factory in Germany and recently Musk asked Twitter subscribers if they wanted the company to build a battery factory in Texas.
Although two weeks ago, Musk said the company did not plan to raise more capital, a new application from the SEC said the company was increasing its capital costs.
"We think it's a good idea," CFRA Research analyst Garrett Nelson said of the new stock issue.
The analyst views Tesla as a "sale" due to the sharp increase in its shares last year.
"One of the risks that we assessed was the plant in Germany. But now that they (Tesla) are talking about a factory in Texas, it (raising new funds) makes a lot of sense".
According to Nelson, Tesla will spend between $2.5 and $3.5 billion on capital projects such as factories in each of the three years starting in 2020.