Tesla shares drop after automaker announces $2 billion stock sale

  • Tesla shares drop after automaker announces $2 billion stock sale

Tesla shares drop after automaker announces $2 billion stock sale

Chief Executive Officer Elon Musk has repeatedly assured investors that the United States-based company will not need to raise more money.

Tesla, the electric-car maker fighting to turn a consistent profit, is planning to sell $2 billion of new stock after a frenzied run-up in prices. "We are still generating positive cash, so in light of that, it doesn't make sense to raise money because we expect to generate cash despite this growth level". "Diluting the company to pay down debt doesn't sound like a wise move".

The company said it would offer 2.65 million shares, of which Musk himself will buy up to $10m in shares.

Tesla shares fell as much as 7.2 per cent after announcing the offering and traded down 4.5 per cent to US$733 as of 8 a.m. Thursday in NY, before the start of regular trading.

Larry Ellison, a Tesla board member and the co-founder of software giant Oracle, will buy as much as $1 million in shares, the automaker said. Its market capitalization now exceeds the combined value of General Motors Co GM.N and Ford Motor Co F.N .

Musk, a billionaire entrepreneur who reached a regulatory settlement with the SEC in 2018, had brushed off questions as recently as late January about whether Tesla should take advantage of the higher stock prices to raise new capital and expand more rapidly. The run has been fueled in part by Tesla's stronger-than-expected earnings for the end of 2019 and a profit at the battery factory the company runs with Panasonic. It said it planned to use the cash to "further strengthen its balance sheet, as well as for general corporate purposes".

The electric vehicle maker restarted production in Shanghai on Monday after the government ended an extended holiday that had been put in place due to the new coronavirus outbreak. Barclays, BofA Securities, Citigroup, Credit Suisse, Deutsche Bank Securities and Wells Fargo are additional book-running managers.