Why Elon Musk’s controversial $2 billion Tesla stock offering makes sense – CNBC

Why Elon Musk’s controversial $2 billion Tesla stock offering makes sense – CNBC

Elon Musk
Tesla CEO Elon Musk unveils the Cybertruck at the TeslaDesign Studio in Hawthorne, Calif. The cracked window glass occurred during a demonstration on the strength of the glass. Robert Hanashiro | USA TODAY | Reuters Tesla shares briefly sold off this morning with the announcement that the company plans to raise $2 billion by selling new shares of stock — diluting the shares of people who already own Tesla — but analysts are saying the money will let Tesla expand faster and secure its sources of batteries as it pushes into giant markets for small sport-utility vehicles and pickup trucks. The company said it plans to use the proceeds "to further strengthen its balance sheet and for general corporate purposes." It will offer 2.65 million Tesla shares through underwriters Goldman Sachs and Morgan Stanley, with expected gross proceeds of $2.3 billion before discounts and expenses. The move marks a sharp change in finance strategy from what Tesla was saying on its fourth-quarter earnings call two weeks ago, when CEO Elon Musk said the company had no plans to raise money in the stock or bond markets and could finance its expansion through retained ....

"We think it's a good idea, " said CFRA Research analyst Garrett Nelson, who rates Tesla a "sell" because of the sharp run-up in its stock over the past year. "One of the risks we had was the factory in Germany. And with them now talking about a factory in Texas, it makes a lot of sense." Tesla will spend between $2.5 billion and $3.5 billion on capital projects such as factories in each of the three years beginning in 2020, Nelson said. Previously, the company had been expected to spend $2 billion to $2.5 billion this year and next year, he said. The company slowed capital spending to $1.3 billion in 2019 after the introduction of its Model 3 sedan. That is likely to delay the expected ramp-up in Tesla's free cash flow, which has been one cause of the surge in Tesla's shares to as much as $969.79 last month, after trading as low as $177 last spring. .

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