San Francisco — Tesla is selling about $2bn of common stock, taking advantage of its surging shares just two weeks after Elon Musk said raising capital did not make sense.
Assuming underwriters exercise their option to purchase additional securities, the offering could bring in about $2.3bn in proceeds, Tesla said in a statement. That will help fund as much as $3.5bn in capital expenditures in 2020, a plan the company disclosed less than an hour earlier in a regulatory filing.
Tesla shares pared a decline of as much as 7.2% before the start of regular trading on Thursday and were down 4% to $736.65 at the open. The stock had more than tripled since the company released the first of two straight positive earnings reports in October.
The offering is a sudden turnabout by Musk, who told analysts two weeks ago that Tesla could fund itself without Wall Street’s help. The company had been spending sensibly and not holding back on expenditures in ways that would limit progress, he said.
“So in light of that, it doesn’t make sense to raise money because we expect to generate cash despite this growth level,” Musk said January 29. Tesla will use proceeds from the offering to strengthen its balance sheet and for general corporate purposes. The expected trading date for the shares is said to be Friday.
The offering is prudent given where the shares are trading, “albeit somewhat contrary to management’s recent commentary”, Ben Kallo, an analyst at Robert W. Baird, wrote in a report. Some investors will argue the company should be raising more, he said.
The high end of Tesla’s 2020 expenditures projection, disclosed for the first time in its 10-K filing, represents a 164% increase from 2019, when stingy spending helped conserve cash. Last year’s $1.33bn expenditures were well below its initial plan for as much as $2.5bn.
In the filing, Tesla disclosed that the US Securities and Exchange Commission (SEC) closed its investigations into statements that Musk made in the fall of 2018 about taking the company private, as well as his prior predictions about Model 3 production rates.
But on December 4, the same day it closed those investigations, the SEC also issued Tesla a subpoena seeking information “concerning certain financial data and contracts”, including regular financing arrangements, the company said.
Tesla does not report sales by region or breakdown of revenue by country until regulatory filings that follow its earnings reports. On Thursday, the company said revenue rose 70% in China, 65% in the Netherlands and 48% in Norway in 2019. But in the US — by far its largest market — revenue fell 15% to $12.65bn.
Tesla had 48,016 full-time employees at the end of 2019, down slightly from 48,817 from a year earlier.
The maker of the Model 3 and S sedans and the Model X crossover is projecting at least 500,000 vehicle deliveries this year, a more than 35% jump from 2019. Musk has accelerated the rollout of Tesla’s next vehicle, the Model Y crossover, to this quarter from initial plans for the fall.
Kevin Tynan, senior autos analyst, says: “Tesla’s planned $2bn stock offering is a logical option to shore up the balance sheet considering the 200% increase in market cap since October and negative beta in 2020. The company’s $1.3bn in capex in 2019 fell short of the $2.5bn guidance and a step up is needed to fund the roster of announced projects that have no facilities to house the production or target dates for launch.”