Tesla seeks to cash in on record run with $5bn share sale
Tesla today said that it would sell $5bn (£3.7bn) in new shares as the electric car maker seeks to cash in on a record rally which has seen the stock rise nearly 500 per cent this year.
According to a filing to the US Securities and Exchange Commission, the new shares will be sold “from time to time” and “at-the-market” prices.
10 of the world’s largest banks, including Goldman Sachs, Barclays, Credit Suisse and Morgan Stanley, will carry out the sale.
The move comes shortly after Elon Musk’s firm completed a five-for-one share split yesterday, in a move designed to make the stock more affordable for retail investors.
Prior to the division, which meant each Tesla shareholder of record at the close of business on 21 August this year received four additional shares for every share held, the firm’s stock was trading at $2,213.40.
After the split, the stock surged again, rising past the $500 mark yesterday. It slipped back to $480 as markets opened in the US today.
Tesla said that it would use the net proceeds from the sale, which is its biggest since the firm’s initial public offering a decade ago, to strengthen its balance sheet.
According to Factset, the firm’s market cap now stands at $464bn after a run which saw it become the world’s most valuable auto company in July.
In July, the company reported its fourth consecutive quarter of profit despite the coronavirus pandemic meaning it had to shutter its plant in Fremont in California for several weeks.
Four consecutive quarters of profit is one of the criteria for joining the premier S&P 500 index, and it has been rumoured that Tesla will be added to the market in the coming weeks.
If so, the firm would be one of the most valuable ever to join the index.
However, Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown warned that share splits were often accompanied by a “marked period of volatility” which could yet knock the stock.
With plans to build new factories near Berlin in Germany and Austin in Texas, the firm is looking to massively expand production of its existing models, as well as developing a new line of vehicles.