Tesla Stock Wobbles After Launching $5 Billion Share Offering
The automaker’s shares slipped following the announcement, and its largest shareholder reduced its holding.
On Tuesday, Tesla announced a $5 billion capital raise to take advantage of its surging stock price, with the stated aim of using the net proceeds to “further strengthen [its] balance sheet, as well as for general corporate purposes.”
Goldman Sachs, Bank of America Securities, Morgan Stanley, Citigroup Global Markets and six other banks will conduct the sale, according to a filing from Tesla. No deadline was given for the capital raise’s completion.
The announcement quickly chilled Tesla’s stock gains on Tuesday, falling 4.7% despite having been up by as much as 7% in pre-market trading. Wednesday saw an uptick, with early gains of as much as 3.7%.
Tesla’s largest investor, Scotland-based investment company Baillie Gifford & Co., also reduced its prior stake of 6.32% down to 4.5%, according to a filing with the Securities and Exchange Commission on Wednesday. The company stated that the reduction was necessary to keep with guidelines restricting the size of a single stock in clients’ portfolios.
“However, we intend to remain significant shareholders for many years ahead,” a company spokesperson said.
Tesla’s stock price has been on a continual surge for months, having risen by over 500% during 2020 even as the global economy has been gripped by the COVID-19 pandemic. Tesla has now been profitable for four consecutive quarters and holds a market capitalisation of roughly $465 billion.
The company’s launching of the new capital raise runs up against CEO Elon Musk’s repeated assurances to investors during the past year that Tesla would have no need to raise money for expensive new expansion initiatives or to pay down debt.
Tesla held $8.6 billion in cash and equivalents by the end of June.