Tesla Stock Shrugs Off The Latest Equity Offering

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Image Courtesy: Sheeraz Raza for ValueWalk, taken at Westfield Mall, London

Tesla Inc. (Nasdaq: TSLA) announced plans for a $2 billion stock offering today — only two weeks after CEO Elon Musk said they had no plans for another capital raise any time soon. Initially, Tesla stock tumbled as much as 7% before the opening bell, but after the markets opened, it shrugged off the new offering and climbed nearly 3% by midday.

New capital raise announced

Two weeks ago with their fourth-quarter earnings report, Musk said it wouldn’t be practical for the automaker to raise funds. Tesla has become profitable, and even more than what analysts had been predicting.

He also said two weeks ago that the company could fund itself without needing any help from Wall Street. Musk also said they had been sensible with their spending without holding back on expenditures that were needed to make continued progress on their targets.

The company didn’t offer many details about what it will use the proceeds from the capital raise for. Tesla said it will use it to strengthen its balance sheet and for “general corporate purposes.” It’s generally assumed that the equity offering will be used to help fund the company’s capital expenditures for this year.

The news about the Tesla stock offering came less than an hour after a regulatory filing in which the company revealed plans for as much as $3.5 billion in capital expenditures for 2020. At the high end of the automaker’s projection for expenditures this year, the increase would be 164% from what the company spent on capital expenditures last year. Tesla spent $1.33 billion last year, which was far below its early plan for about $2.5 billion.

Analysts praise Tesla’s stock offering

Analysts praised Tesla’s stock offering as a way to beef up the company’s balance sheet and push its expansion plans further along. Cathie Wood of ARK Invest has been bullish on Tesla for a long time, and she has an astonishing $7,000 price target on the stock.

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