Tesla Just Announced New Stock Sale Worth Up to $5 Billion
On Tuesday, Tesla Inc. announced that it planned to sell as much as $5 billion in new stock, according to the Wall Street Journal.
Tesla shares have surged throughout 2020 so this move seems to be motivated by raising additional capital and maintaining the rally. Tesla did something similar in September when they raised billions as well.
After adjusting for the stock split earlier this year, Tesla shares are 9 times greater than where they were a year ago. This surge is largely due to improved liquidity, consistent profitability, and a recent announcement that the stock would be added to the S&P 500 index in December.
This new round of fundraising may be helping finance the new Tesla factory being built in Austin, Texas or the one in Berlin. Tesla has been vocal about its plans to increase its capacity which has lead to increased capital spending guidance in 2021 and 2022. Tesla Chief Financial Officer Zach Kirkhorn recently stated that the company expects capital spending between $2 billion and $2.5 billion in 2021 and 2022.
However, Tesla CEO and founder Elon Musk recently stated that the company needs to cut costs to maintain profits. "We're really just trying to spend money at the fastest rate that we can possibly spend it and not waste it," Musk said in October. "We will certainly waste some of it, but trying to not waste too much of it, this is very difficult."
"They have rationalized costs over the last couple years effectively," said Colin Rusch, an analyst at Oppenheimer & Co. He is bullish on the outlook for the stock. "We're watching execution very closely, of course, but there's a very large opportunity and we think they have a substantial lead over the competition."