Tesla plans US$2 billion share sale amid stock surge

February 14, 2020 09:54
Tesla is launching a stock sale, taking advantage of the big surge in its share price in recent months. Photo: Reuters

Tesla plans to raise US$2 billion in a stock offering, seizing an opportunity following a huge jump in its share price over the past few months.

The US electric carmaker announced on Thursday that it will offer 2.65 million shares, reversing the firm's often-stated policy of avoiding sales of new stock, Reuters reports.

CEO Elon Musk will buy up to US$10 million of the new stock, while board member and Oracle co-founder Larry Ellison will purchase up to US$1 million worth of shares.

Tesla’s move comes after its shares tripled in price since October when the company posted a rare quarterly profit. 

The decision to raise money will come as a shock to some investors following Musk’s previous comments.

Musk had repeatedly assured investors that Tesla will not need to raise more money for costly initiatives including production of a new vehicle model, the ramp-up of its China production and the construction of its first European factory.

"It doesn’t make sense to raise money,” Musk said during a Jan. 29 earnings call when an investor asked why Tesla does not take advantage of its favorable share price to accelerate production. Musk said the company would generate enough cash on its own to fund ambitious expansion plans.

Tesla, whose outstanding debt was US$13.42 billion at the end of 2019, posted its second quarterly profit in a row in January and said it would comfortably make more than half a million cars this year.

The company said on Thursday that it plans to use proceeds from the offering to strengthen its balance sheet and for general corporate purposes.

Tesla raised about US$2.3 billion last May to start production in China and spend on developing new models, including the high-volume Model Y SUV and a Semi commercial truck, whose launch has been delayed due to a lack of battery production capacity.

Since the last capital raise, Tesla has built a US$2 billion factory in Shanghai and unveiled the futuristic Cybertruck pickup. The Shanghai factory started delivering cars last month.

Musk said Tesla needs to produce more batteries to increase vehicle production, adding that some projects like its electric semi-trailer truck program cannot proceed without battery improvements.

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