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Tesla shares fall after company announces $2 billion common stock offering

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Tesla’s stock slid after Elon Musk’s automaker announced it plans to offer $2 billion of common stock.

Musk himself will buy as much as $10 million of stock in this offering, while Tesla board member Larry Ellison will also purchase up to $1 million. The company’s offering will offer 2.65 million Tesla shares through underwriters Goldman Sachs and Morgan Stanley.

Tesla said it plans to use the proceeds from the offering “to further strengthen its balance sheet, as well as for general corporate purposes.”

Shares of Tesla on Thursday slumped about 5% in premarket trading from its previous close of $767.29. But the stock is still well ahead of where it was as recently as December. Even accounting for the premarket moves Tesla stock is still up 109%, 219% and 135% over the last three, six and 12 months, respectively. Tesla at one point earlier in the month reached as high as $968.99.

Traders had speculated that Tesla may use the recent run-up in the stock as an opportunity to raise funds by selling more shares to the public. The sudden jump in the stock raised concerns it had become a speculative bubble driven by a short squeeze and had become detached from fundamentals.

Two weeks ago Musk declared that Tesla did not plan to raise any more capital because it was “spending money, I think, efficiently, and we’re not artificially limiting our progress.”

“It doesn’t make sense to raise money because we expect to generate cash despite this growth level,” Musk said.

Musk’s sentiment was echoed by CFO Zachary Kirkhorn during the company’s fourth-quarter earnings report.

The company announced a secondary offering of stock and bonds in May of last year that weighed on the stock. The shares were trading around $244 at the time and traded as low as $176.99 in the month following the offering before bottoming as investors worried about the increase in share supply and the company’s financial standing.

Source: Top News and Analysis (pro)