Tesla is taking advantage of the recent rise in its share price and issued new shares to obtain fresh capital. In gross terms, Tesla could raise up to 2.3 billion US dollars including the over-allotment option.
The 2 billion dollars worth of additional stock were described as non-sensical by CEO Elon Musk only a few weeks ago, but the impact of the Tesla share value exceeding $700 per share seems to have changed his mind rather quickly. During the Q4 2019 review, Musk was asked whether his company was considering raising more capital via stock price since the price increase was already starting to show. His response didn’t leave much room for interpretation: “So in light of that, it doesn’t make sense to raise money because we expect to generate cash despite this growth level.”
In the SEC filing announcing the move, they wrote that the funds will be used to “further strengthen our balance sheet” and “general corporate purposes”, which also contradicts Musk’s earlier response, saying that the company was sensibly spending their money as fast as they could, and there was “no artificial hold back on expenditures.” This would buy the company a pretty comfortable financial cushion but certainly move more towards traditional corporate structures, rather than the startup ethics that Musk has been incorporating into Tesla since inception.
Over the last few weeks, Tesla’s share price has risen significantly and at times more than doubled. At its peak, the value had even climbed to almost 969 dollars. By comparison, at the end of 2019 it was still around 418 dollars. Recently, the price had fallen again somewhat. At the end of trading on Wednesday, it was over 767 dollars. The Californians were thus worth around 126.6 billion euros on the stock exchange. To compare: Volkswagen currently stands at around 86 billion euros.
The US American company certainly has enough places to be investing fresh capital, as they are expanding in China, and still deliberating the construction and setup of Gigafactory 4 in Germany. Yesterday, it was also announced that the Californian company was looking at manufacturing their own battery cells, which would save them money in the long term, albeit with a solid investment to start with. The added financial security will no doubt benefit the company’s bottom line.
With reporting by Daniel Bönnighausen, Germany
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