Tesla stock slipped after the company announced it has decided to raise capital again. It’s the second time in only three months that the automaker is raising capital, and it comes after CEO Elon Musk said they wouldn’t do it again anytime soon. It’s also the third time Tesla has raised capital in only 10 months.
Tesla announces another capital raise
A regulatory filing with the Securities and Exchange Commission reveals details about Tesla's latest capital raise. The automaker will sell up to $5 billion in common shares through "at-the-market" offering program. That means the shares will be sold gradually at market prices.
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Tesla stock has soared 670% so far this year, so it seems likely that the company will want to sell those shares sooner rather than later and unload them while the stock is close to record highs. The stock fell by as much as 4% in premarket trading this morning after the announcement about the capital raise.
This latest capital raise comes as Tesla stock has been rallying in anticipation of it being added to the S&P 500 later this month. Investors have also inflated the value of the automaker to more than the valuations assigned to its peers following the opening of the Shanghai plant, new battery technology and the rollout of the Model Y.
Flush with cash
Tesla's cash balance could near $20 billion after the capital raise, according to a Bloomberg Intelligence credit analyst. He wrote that following three upgrades during the COVID-19 pandemic, the company's credit quality is now "well in excess" of its ratings. Tesla had $14.5 billion in cash and equivalents as of the end of the third quarter.
The company sold another $5 billion in shares to raise capital in September and an additional $2 billion in shares in February. The capital raises enabled Tesla to more than double the amount it had been planning to spend on factories and equipment this year.
This latest cash infusion will enable the company to pay for its plans to double its budget for capital expenditures over the next two years. Those plans were announced in October. Tesla now plans to spend between $4.5 billion and $6 billion in capital expenditures in the next two years.
The automaker is building new factories in Berlin, Germany and Austin, Texas and expanding the production capacity at its current plants in Fremont, California and Shanghai.