Tesla Cashes in on Surging Stock
Can you ever have too much money? Apparently not, if you’re Tesla.
A day after completing a five-for-one stock split, the electric vehicle giant announced plans for a $5 billion capital raise to take advantage of surging demand for its shares.
Under the plan, the carmaker will sell new shares of common stock through 10 leading financial institutes. No timeline was provided for completing the sale.
What’s it For?
Tesla says it doesn’t have any immediate plans to use the money, other than to strengthen its balance sheet and “general corporate purposes.” CEO Elon Musk previously has said the company wouldn’t need to raise any capital to pay for its ambitious growth plans, which includes several new products and constructing factories in Germany and Texas.
Tesla already has a ton of money to play with. In its second-quarter financial filings, the company reported having $8.6 billion cash and cash equivalents on hand at the end of June.
For now, Tesla plans to invest proceeds from the stock sale in highly liquid assets, including U.S. government securities. The company also is expected to use the infusion to reduce its debt load.
2020 4X Vision
Tesla’s stock price soared more than 400% in 2020 and was trading at nearly $2,000 per share prior to the stock split—the first since the company’s initial public offering a decade ago. The new shares closed at $498.32 on Monday but fell to $475 on Tuesday.
Earlier this year, Tesla raced past Toyota to become the world’s largest carmaker by market value. It currently has a market capitalization of $465 billion—about twice that of Toyota’s. Analyst, however, point out that this is 16 times Tesla’s projected revenue and exponentially greater than its likely net income.
As for Musk, the recent stock surge has pushed his net worth over $100 billion. That makes him the fifth-richest person in the world, according to Forbes.
I'm not talking about a plastic Revell model of a '57 Chevy, but a real vehicle, one that rolls off an assembly line in 1999 with another 99,999 just like it right behind. Is it possible, or is this just a fantasy of the marketing department at Elmer's?
A class-action lawsuit has been filed against General Motors Co. over claimed flaws in the company’s 8-speed automatic transmission used in 2015-2019 model rear-drive vehicles.
The future of e-mobility depends on collaboration. Automotive companies will need to build business models based on strengths and limitations to tap into the EV value chain and fully capitalize on the opportunities within the new EV ecosystem.