(Bloomberg) – Elon Musk dreams big dreams. Tesla Inc. uses Wall Street to turn funds into reality. Banks pay millions in fees. And instead of punishing the company for watering down its shareholders, the market is sending the stock higher.
The virtuous circle has enabled Tesla to raise around $ 14 billion over the past decade and support the electric car maker with countless ups and downs. The latest offer announced Thursday – according to a person familiar with the matter at $ 767 per share – increased Tesla’s market capitalization to nearly $ 146 billion, behind only Toyota Motor Corp. among the most valuable car manufacturers in the world.
While Tesla viewers have seen this film before, the latest script was full of twists and turns. The 48-year-old Musk said two weeks ago when calling for profits that it made no sense for the company to raise capital again. The manufacturer of the Model 3 sedan had spent reasonable money without holding back expenses that would hinder progress.
But the rise of Tesla stock in the past few months has apparently changed the mind of the chief executive officer. Tesla will use the proceeds – at least $ 2 billion – of the offer to support its balance sheet and fund Musk’s seemingly endless endeavors.
After Musk and CFO Zach Kirkhorn were denied weeks ago when asked how much Tesla had planned to spend this year, the company announced Thursday that its budget will be $ 3.5 billion, more than that Double the previous year.
Chinese banks are paying most of the bill for the Musk factory just opened near Shanghai, but he is also planning to build his next one near Berlin and to consider the possibility of another one in Texas.
Tesla is no longer a tiny niche provider that only makes cool but expensive cars in expensive California. To get to this point, around $ 12.5 billion in debt had to be raised, twice as much cash and equivalents as at year-end.
“Musk had previously assured investors that he had no intention of raising additional capital,” said Gene Munster, managing partner of Loup Ventures, in a report. “While Elon reverses his promises, that’s a frequent criticism of Tesla, but the company’s bottom line is a much more common (and justified) criticism.”
Tesla’s stock has more than tripled since the company released the first of two positive quarterly reports. Musk has accelerated the production plan for Model Y, the crossover SUV that he sees as the company’s new top seller.
However, the Y model is not expected to make a significant contribution to delivery in the first months of the year, and Kirkhorn has warned that sales in the first quarter are likely to slow due to seasonality. Production in China has also been temporarily suspended due to the corona virus, and Model 3s and Model Ys production in California is expected to reduce profit margins.
Tesla managed to schedule its last offer before any of these risks weighed on the stock before its next earnings report. The company sold the shares at a discount of 4.6% at the close of trading on Thursday.
With all that Musk has planned – finally bringing the Semi, Roadster and Cybertruck models to the market and getting back into a run-down solar roof business – some investors and analysts think the company should try to raise enough money, so that it really needs to be searched for from now on.
The amount the company has raised over the past ten years is substantial, but not unprecedented. Netflix Inc. raised approximately $ 15 billion in the same period, almost exclusively from debt securities, according to data compiled by Bloomberg.
“We have long wanted Tesla to raise large amounts of cash through equity issuance because of its high valuation and may never have to raise capital again,” said David Whiston, analyst at Morningstar Inc., in a note. “We want more correspondence between the company’s actions and the words of CEO Elon Musk.”
(Updates with offer prices in the 11th paragraph.)
– With the support of Brandon Kochkodin and Drew Singer.
To contact the editors responsible for this story: Craig Trudell at [email protected], Melinda Grenier
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