Tesla Announces Offering of Common Stock
February 13, 2020 Tesla announced $2billionof common stock in an underwritten registered public offering. Tesla has also granted the underwriters a 30-day option to purchase up to approximately $300 million of additional common stock.
Elon Musk, Tesla’s CEO, will participate by purchasing up to $10 million of common stock in this offering. In addition, Larry Ellison, a member of Tesla’s Board of Directors, will purchase up to $1 million of common stock.
The aggregate gross proceeds of the offering, assuming full exercise by the underwriters of their option to purchase additional securities, would be approximately $2.3 billion before discounts and expenses. Tesla intends to use the net proceeds from the offering to further strengthen its balance sheet, as well as for general corporate purposes.
Goldman Sachs & Co. LLC and Morgan Stanley are acting as lead joint book-running managers for the offering, with Barclays, BofA Securities, Citigroup, Credit Suisse, Deutsche Bank Securities, and Wells Fargo Securities acting as additional book-running managers, and Societe Generale acting as co-manager.
Tesla Inc. is selling about $2 billion of common stock, taking advantage of its surging shares just two weeks after Elon Musk said raising capital didn’t make sense.
Assuming underwriters exercise their option to purchase additional securities, the offering could bring in about $2.3 billion in proceeds, Tesla said in a statement. That will help fund as much as $3.5 billion in capital expenditures this year, a plan the company disclosed less than an hour earlier in a regulatory filing.
Tesla shares pared a decline of as much as 7.2% before the start of regular trading Thursday and were down 4% to $736.65 at the open. The stock had more than tripled since the company released the first of two straight positive earnings reports in October.
The offering is a sudden turnabout by Musk, 48, who told analysts two weeks ago that Tesla could fund itself without Wall Street’s help. The company had been spending sensibly and not holding back on expenditures in ways that would limit progress, he said.
“So in light of that, it doesn’t make sense to raise money because we expect to generate cash despite this growth level,” Musk said Jan. 29. Tesla will use proceeds from the offering to strengthen its balance sheet and for general corporate purposes. The expected trading date for the shares is said to be Friday.
The offering is prudent given where the shares are trading, “albeit somewhat contrary to management’s recent commentary,” Ben Kallo, an analyst at Robert W. Baird, wrote in a report. Some investors will argue the company should be raising more, he said.
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