Tesla shares (TSLA) dropped Thursday following an announcement by the California automaker that they will be offering approximately $2 billion in common stock in their latest fundraising effort.
The offering will boost Tesla’s bottom line by as much as $2.3 billion, at a time when the company has a number of capital intensive projects on the go, including the early release of the Model Y, with the first deliveries expected next month.
After the announcement, shares dropped by as much as 7% in early trading. By mid-day, stock prices had rebounded to about a 3% increase over the previous days close, approaching the $800 mark.
This fundraising effort by Tesla makes sense on a number of fronts. The first being the current high stock price. Elon Musk previously stating that common stock offerings didn’t make sense, he said that at a time when shares were less than half of what they currently are. This is an easy way to sell a small amount of shares for a large amount of return.
Additionally, an extra $2 billion in the bank gives Tesla a strong footing to be able to continue to expand their product line and invest in new technologies over at least the next decade to help deliver on their mission statement – to accelerate the world’s transition to sustainable energy.
Here is a copy of the full press release.
PALO ALTO, Calif., Feb. 13, 2020 (GLOBE NEWSWIRE) — Tesla, Inc. (“Tesla”) today announced that it intends to offer approximately $2 billion of 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.
An effective registration statement relating to the securities was filed with the Securities and Exchange Commission on May 2, 2019. The offering of these securities will be made only by means of a prospectus supplement and the accompanying prospectus. Copies of the preliminary prospectus supplement and the accompanying prospectus may be obtained from (i) Goldman Sachs & Co. LLC, Attn: Prospectus Department, 200 West Street, New York, NY 10282, telephone: 866-471-2526, facsimile: 212-902-9316 or email: prospectus-ny@ny.email.gs.com or (ii) Morgan Stanley & Co. LLC, Attention: Prospectus Department, 180 Varick Street, 2nd Floor, New York, New York 10014.
This press release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. The securities being offered have not been approved or disapproved by any regulatory authority, nor has any such authority passed upon the accuracy or adequacy of the registration statement, the prospectus contained therein or the prospectus supplement.
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