Electric vehicle and battery storage company Tesla has announced it will sell $5 billion worth of new shares, tapping the surge in value of its stock before and after its five-to-one stock split.
Share values dipped by 4.67% on Tuesday after an initial post-split surge of 12.57% that brought the company’s value to above that of Visa.
The dip, however, is hardly noticeable amid the recent trend, which has seen the value increase five-fold since the start of 2020, despite the fact that its promised vehicle output of 500,000 for 2020 is one hundredth that of Toyota, Volkswagen, General Motors, Ford, FiatChrysler and Honda. Tesla is now valued at more all those companies combined.
In a filing to the US Securities and Exchange Commission on Tuesday, Tesla said it will sell off the stock via Goldman Sachs, BofA Securities, Barclays Capital, Citigroup Global Markets, Deutsche Bank, Morgan Stanley, Credit Suisse, SG Americas, Wells Fargo Securities and BNP Paribas.
The proceeds of the sales will be used to “further strengthen our balance sheet, as well as for general corporate purposes,” the company said in its filing.
Unlike other car makers, Tesla sailed through the Covid-19 pandemic that brought the world to standstill in the first half of 2020.
Congratulating the company for its fourth consecutive profitable quarter in July, Tesla CEO and co-founder Elon Musk said, “Tesla was able to navigate through Q2 due to our agile and dynamic culture.”
The electric car maker’s mission to accelerate sustainable energy and transport is not the only part of its growth story. Its behaviour in the stock markets is more akin to that of a tech company, which some analysts suggest it is, given its development from the ground up of a proprietary AI chip and autonomous driving software.
It has soared well above the S&P500’s 2020 growth (which Tesla is now eligible to join), and which closed at an all time high on Tuesday with Wall Street analysts citing a strong recovery from pandemic lows thanks to tech stocks.
Tesla’s 500% increase in value by market cap comes just 6 months after Musk noted that the company’s growth was not dependent on raising more capital.
“We’re spending money as quickly as we can spend it sensibly,” Musk said at the company’s Q4 2019 earnings call in January.
“We are not artificially limiting our progress. Despite all that, we are still generating positive cash. In light of that, it doesn’t make sense to raise money because we expect to generate cash despite this growth level.”
While Tesla’s production output is well below legacy car makers, and in some analysts opinion overvalued, it is in the process of positioning itself to increase that output with the construction of the electric car “Gigafactory 4” in Berlin and another now announced for Austin, Texas, at which it will build the Cybertruck.
“We will continue to appropriately manage our cash flows through cost optimization and close working capital management,” said Musk in July.
“This is key as we remain focused on expanding production, scaling our operations and preparing for the launch of three new factories over the next year and a half.”
Bridie Schmidt is lead reporter for The Driven, sister site of Renew Economy. She has been writing about electric vehicles since 2018, and has a keen interest in the role that zero-emissions transport has to play in sustainability. She has participated in podcasts such as Download This Show with Marc Fennell and Shirtloads of Science with Karl Kruszelnicki and is co-organiser of the Northern Rivers Electric Vehicle Forum. Bridie also owns a Tesla Model 3 and has it available for hire on evee.com.au.