Tesla's $2B Stock Offering Announcement Is A Good Sign Of Accelerating Growth

by Claribelle Deveza February 13, 2020

Tesla's $2B Stock Offering Announcement Is A Good Sign Of Accelerating Growth

Tesla (NASDAQ:TSLA) announced that it intends to offer $2 billion of common stock in a press release on Thursday, February 13, 2020, which may be a good sign of accelerating growth. Tesla CEO Elon Musk plans to purchase up to $10 million of common stock in the offering. Tesla Board member Larry Ellison—the co-founder of Oracle—intends to purchase $1 million of common stock as well.

The $2 billion offer will be in an underwritten registered public offering. Underwriters were given 30 days to buy up to $300 million of additional common stock. If underwriters take advantage of the 30-day option, the aggregate gross proceeds of the offering would be $2.3 billion—before discounts and expenses.

Tesla plans to use the net proceeds from the offering to "strengthen its balance sheet" and for the general expenses of the company. Some TSLA retail investors have suggested that the proceeds from this fundraising round could help Tesla's growth in the near future.

It has been suggested that the net proceeds could help Tesla build factories. Currently, the EV automaker has not officially purchased the land for Giga Berlin. The final land price for the 300 hectare land in Brandenburg has yet to be settled. Elon Musk also dropped a suggestion for a Giga Texas in the future, and Fremont will reportedly start manufacturing batteries alongside Giga Nevada, according to recent reports. There are also reports of a possible Tesla battery facility in Colorado.

Credit: Tesla

The proceeds could help Tesla expand its overall production capacity. During the latest Tesla Earnings Call, Elon Musk mentioned the need to address battery capacity, which will be needed for Tesla's upcoming vehicles, specifically for the Cybertruck and Tesla Semi.

"So, the thing we're going to be really focused on is increasing battery production capacity because that's very fundamental because if you don't improve battery production capacity, then you end up just shifting unit volume from one product to another, and you haven't actually produced more electric vehicles...

"So, that's part of the reason why we have not, for example, really accelerated production of the Tesla Semi because it does use a lot of cells and unless we've got a lot of battery cells available, then -- and say like accelerating production of the Tesla Semi would then necessarily mean making pure Model 3 or Model Y cars. And so, we've got a really -- make sure we get a very steep ramp in battery production and continue to improve the cost per kilowatt-hour of the batteries. This is very fundamental and extremely difficult," Elon Musk said.

Goldman Sachs & Morgan Stanley will be the lead book-running managers for Tesla's $2 billion offering of common stock. Several other corporations will be acting as additional book-keeping managers, including Barclays, BofA Securities, Citigroup, Credit Suisse, Deutsche Bank Securities, and Wells Fargo Securities. Société Generale will be acting co-manager.

Tesla's press release about its new common stock offering could be accessed here.

Featured Image Credit: Tesla

Legal Disclaimer --

This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Claribelle Deveza, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Claribelle Deveza holds zero share of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.

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