Tesla to raise $5 billion through share offering

Tesla surged as much as 12% on Monday to $US497 per share in the company's first day of post-stock-split trading, extending the automaker's blistering rally.

In a Securities and Exchange Commission filing, Tesla disclosed on Tuesday that it has entered into a so-called "equity distribution agreement" to sell the additional allotment of up to 10 million shares, or about 1.1% of its total shares outstanding. Citigroup Global Markets Inc, and Morgan Stanley will sell the shares at Tesla's direction.

"We believe this is the smart move at the right time for Musk & Co. after the parabolic rally in shares with the appetite strong among investors to play the transformational EV trend through pure play Tesla over the coming years". Tesla's share price is now down 0.34% to its adjusted split price of $469.40. The Palo Alto, California-based company plans to use the proceeds to strengthen its balance sheet and for general corporate purposes.

More news: India Sets Worldwide Record With Single-Day Rise in Coronavirus Cases

The plan 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 Tuesday. The company is in the midst of several construction projects, including factories in Berlin and near Austin, in addition to its day-to-day operations.

Electric carmaker Tesla followed suit earlier this month by announcing a 5-for-1 split to portion its richly valued stock into smaller chunks, which also took effect on Monday. The stock has climbed nearly 500 per cent this year, accounting for the five-for-one stock split that became official August 31, and in the process made Musk the world's third-richest person.

RBC Capital analyst Joseph Spak held on to his underperform rating on Tesla but lifted his one-year price target to $290 from $170 on the admission that his team "underestimated a critical valuation point: seemingly insatiable investor demand for alternative/clean vehicles". Since March 18, Tesla's stock price has gained 598%.

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