Tesla hopes to raise over $2 billion
While Elon Musk had promised not to take advantage of his group’s stock market boom, Tesla announced that it wanted to raise more than $2 billion in new money.
Promises only bind those who believe in them. While Elon Musk had pledged two weeks ago not to take further debt to the financial markets, Tesla has finally announced its intention to raise significant amounts of new money. These funds will be used to “further strengthen the balance sheet” and to finance the company’s expenses and overheads, the Californian electric vehicle manufacturer said in a document addressed to the stock exchange gendarme, the SEC.
Higher valuation than GM, Ford and FCA combined
In detail, Tesla plans to sell just over 2.65 million shares, which would bring in just over $2 billion at Tesla’s closing price of $767.29 on Wednesday night on the New York Stock Exchange. Elon Musk has committed himself to buy 13,032 shares for $10 million in total, while Larry Ellison, a Tesla board member and co-founder of the Oracle computer group, will buy 1 million shares.
These announcements were not well received on Wall Street, where Tesla stock was selling for more than 2% in the initial trading. The Tesla share recently experienced a dizzying surge, pushing the company’s valuation to more than $135 billion Wednesday night, more than General Motors, Ford and Fiat Chrysler combined ($112 billion).
11.6 billion in debt
But on Thursday, investors were puzzled because Elon Musk had said on January 29, during the 2019 earnings conference call, that Tesla would not go further into the markets to finance its operations. It doesn’t make sense to raise money when we expect to generate cash flow,” Musk said, “It doesn’t make sense to raise money when we expect to generate cash flow.
Tesla’s debt, which has never generated a single annual profit since its inception in 2003, was $11.6 billion as of December 31, 2019. The group is swarming with projects: it is building its first European plant near Berlin and has promised to be operational in 2021. At the same time, it recently started production at its Chinese plant in Shanghai and is currently producing its first SUV, the Model Y. (With AFP)