September 1, 2020 10:00 AM, EDT

Tesla to Sell up to $5 Billion of Shares After Stock Surge

Tesla announced plans to sell $5 billion of stocks over time to increase capital.Tesla vehicles sit in a lot at the company's assembly plant in Fremont, Calif. (David Paul Morris/Bloomberg News)

[Ensure you have all the info you need in these unprecedented times. Subscribe now.]

Tesla Inc. plans to sell as much as $5 billion of shares, capitalizing on its high-flying price and on a recent stock split that made it more accessible to individual investors.

The Palo Alto, Calif.-based carmaker will sell the shares “from time to time” through an agreement with several banks, according to a regulatory filing. It plans to use the proceeds to strengthen its balance sheet and for general corporate purposes.

The new program could be the largest equity raise ever for Elon Musk’s company if it sells at least $2.34 billion under the plan. Until now, Tesla had raised about $14 billion over the past decade through secondary stock offerings, most recently in February. The sales have helped bolster the company’s cash during its transition from a niche electric carmaker to the mass market.


See more transportation stock listings

Tesla shares were down more than 3% in early trading Sept. 1, following earlier gains after the share sale was disclosed. The stock has climbed almost 500% this year on a split-adjusted basis.

The move is a form of “weaponizing” Tesla’s cheap cost of capital, Evercore ISI analysts Chris McNally and John Saager wrote in a research note published Sept. 1.

As of last September, $5 billion would have represented a significant portion of Tesla’s market capitalization, which dipped just below $40 billion at the time. Today it is about 1% of the $460 billion market value, which exceeds that of Toyota Motor Corp. and Ford Motor Co. combined.

Tesla had about $8.6 billion of cash and equivalent as of June 30.

Banks in the $5 billion program include Goldman Sachs Group Inc., Bank of America Corp., Barclays Capital Inc., Citigroup Inc., Deutsche Bank AG, Morgan Stanley, Credit Suisse Group AG, SG Americas Securities, Wells Fargo & Co. and BNP Paribas SA.

Want more news? Listen to today's daily briefing: