Tech

Tesla to raise up to $5 billion in share offering, its second in three months

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Key Points
  • Tesla unveiled a $5 billion capital raise, its second such move in three months.
  • The additional shares will be sold "from time to time" and "at-the-market" prices, Tesla said in a filing with the Securities and Exchange Commission.
  • With Tesla's market capitalization at $598 billion, the new offering represents less than 1% of the company's value.

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Tesla to sell $5 billion in stock 'from time to time'

Tesla on Tuesday unveiled a plan to raise $5 billion, its second such move in three months as the electric car maker cashes in on a meteoric rally in its shares this year.

The additional shares will be sold "from time to time" and "at-the-market" prices, Tesla said in a filing with the Securities and Exchange Commission. The filing said banks will sell shares based on directives from Tesla.

With Tesla's market capitalization at $598 billion, the new offering represents less than 1% of the company's value.

The plan comes at an important time for Tesla, which is in the process of building new factories in Germany and Texas as part of its global expansion. Building new plants is extremely capital intensive for automakers. Tesla warned investors of its upcoming spending in October, saying it planned to spend $2.5 billion in 2021 and 2022, especially on new factories and expansion, including battery cell manufacturing.

"We're trying to spend money at the fastest rate that we can possibly spend it and not waste it," Tesla CEO Elon Musk said during the company's third quarter earnings call. "That's our current plan. And so it's quite hard to spend money without wasting it."

Operating expenses for Tesla jumped 33% in the third quarter from the previous three months to $1.25 billion.

Wedbush analyst Dan Ives said in a note Tuesday the capital raise is a "clear positive and further solidifies" the bull case for Tesla.

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"Now in a clear position of strength and out of the red ink with major factory build outs on the horizon (Austin and Berlin), Musk and his red cape are raising enough capital to get the balance sheet and capital structure to further firm up its growing cash position and slowly get out of its debt situation, which throws the lingering bear thesis for Tesla out the window for now," he wrote.

The company's shares, which touched a record high on Monday, reversed course to fall 1.1% in premarket trading Tuesday. Shares of the automaker are up roughly 670% this year. That includes a 5-for-1 stock split in August.

Tesla's most recent rally was driven by its announced inclusion in the S&P 500 beginning Dec. 21. Since the announcement, shares of Tesla are up 57.3%. Tesla is expected to be the largest addition to the stock market index in its history.

Tesla entered an equity distribution agreement with banks including Goldman Sachs and Citigroup Global Markets to sell its common stock, having aggregate sales proceeds of up to $5 billion. The banks will be compensated by a commission of up to 0.25% of the aggregate gross proceeds from each sale of the shares, according to its SEC filing.

—Reuters contributed to this report.