Tesla prices secondary stock offering at discounted $767 a share

Tesla selling $2B of new stock after frenzied price gains

Tesla selling $2B of new stock after frenzied price gains

Shares of Tesla Inc (NASDAQ:TSLA) dropped 3% in pre-market trading Friday after it announced a secondary common stock offering of 2.65 million shares at $767 apiece to raise more than $2 billion. "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".

That demand continued to surge Thursday, even though issuing additional company shares can dilute the value of those already on the market.

CEO Elon Musk will buy as much as $10 million of the shares and board member Larry Ellison, the founder of software giant Oracle, will take another $1 million of them, according to a regulatory filing.

Tesla shares closed at $804 on Thursday.

"This will be a bit of a shock to some given the company talked about no need to raise capital on its recent conference call, although the bulls (which we agree with) will say this essentially rips the band-aid off and takes the doomsday cash crunch scenario some predicted down the road now off the table", Wedbush analyst Daniel Ives wrote in a Thursday note.

"He is smart to grab cash by selling stock at a sky-high price he might not see six months from now".

The electric vehicle maker said it plans to use the proceeds from the offering to strengthen its balance sheet and for general corporate purposes.

Tesla raised about $2.3bn in May to start production in China and spend on developing new models, including the high-volume Model Y SUV and a Semi commercial truck, whose launch has been delayed due to a lack of battery production capacity. Its profit and revenue in the last three months of 2019 topped estimates and the company said 2020 deliveries should comfortably beat projections amid demand from new customers.

The underwriters will get an option to buy up to $300mn in additional shares.

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