Tesla will sell up to $ 5 billion in stock in the middle of its epic rally

Tesla will sell up to $ 5 billion in stock in the middle of its epic rally

The electric auto manufacturer on 1st Sep 2020 said it would sell up to $ 5 billion in new stock, in the midst of Tesla 's remarkable rise that has seen shares rocket to new highs. In a filing with the Securities and Exchange Commission, Tesla said the additional shares would be sold "from time to time" at "at-the-market" rates. It said that banks would sell shares according to Tesla 's directives.

As per Tesla they are planning to use the net proceeds from this bid, if any, to further improve Tesla balance sheet and for general corporate purposes. The stock traded briefly in the green on 1st Sep, but moved lower throughout the afternoon trading and finished the session down 4.67%.

The rapid growth of this year's downturn hardly dents shares. The electric car manufacturer has earned nearly 500% in 2020 through the closing of 31st August 2020. Shares have risen 1,004% in the last year relative to the 20% increase in the S&P 500′s.

Tesla's run-up has only gained traction after the firm revealed its 5-for-1 share split on 11th August. Tesla 's stock surged 81.3% at the time. That benefit includes 31st August 12.6% pop when the split came into effect. The rise came despite the fact the stock splits are merely symbolic, suggesting little about actual business changes in the firm.

Tesla's market cap currently stands at about $464 billion, which means the latest bid represents around 1% of the valuation of the firm. The capital is raising a "smart leap," citing high investor appetite to "play the disruptive EV trend through pure Tesla play in the coming years."

Tesla CEO Elon Musk is "raising enough money to get the balance sheet and capital structure to further improve its increasing cash position and eventually get out of its debt situation, which for now throws out the window on Tesla's lingering bear thesis. Wedbush is on board with a neutral rating and a price target of $380. Part of Tesla's share appreciation is attributed to the company announcing its fourth straight quarter of earnings in its report of 22nd July, which allows the electric car manufacturer to be included in the S&P 500. Tesla also reported deliveries of vehicles which were better than anticipated in the second quarter. Still, many on the Street have been confused by the pace at which investors poured up into the business. Miller Tabak 's chief market strategist Matt Maley cautioned that a pullback is due for the shares. Those "who buy TSLA stock on the latest $5billion equity distribution they revealed on 1st September 2020. "But if this stock bounces a little more over the next week or two, in Tesla view it will be trading at least 30% below the level of 1st September before the end of the year," he added. RBC reiterated on stock on 1st September its underperformance rating, calling the automaker "fundamentally overvalued," but the company raised its price target from $170 to $290.

Tesla last filmed capital markets in February, when it revealed a common stock offer of $2 billion. The announcement came just two weeks after Musk said he had no intention of raising capital during the company's fourth-quarter earnings report. "We spend money as fast as we are able to spend it sensibly," Musk said on January 29. "We 're not restricting our development artificially. We still produce positive cash, in spite of all that. Given that, raising money doesn't make sense, but despite this level of growth, they expect to generate cash.