Tesla has been on quite the tear so far in 2020. Its stock is soaring, it plans to roll out two new vehicles, and its clean energy division is finally starting to take off. With all of those projects, however, comes a need for funding. Although Jeff Bezos might be literally made of money, Tesla isn’t.
As such, the electric car company announced on Thursday that it is planning to raise $2 billion by offering new common stock. Though Telsa has avoided the practice in the past, its recent market boom is too tempting to pass up. The new funding will help keep its many initiatives running at full speed.
Fresh Money Incoming
The move to offer new shares comes as somewhat of a surprise. After all, Tesla CEO Elon Musk said as recently as January 29 that his company wouldn’t need to artificially raise any more money. In an earnings call on that date, he said, “It doesn’t make sense to raise money… Diluting the company to pay down debt doesn’t sound like a wise move.”
However, that is exactly what Tesla will now do with its new stock offering. The company plans to make 2.65 million shares available. Musk himself says that he plans to purchase up to $10 million worth. Oracle co-founder Larry Ellison will snap up an additional $1 million worth.
In response to the news, Telsa’s shares dropped by about 1 percent in early trading on Thursday. However, at the time of this writing, they have rebounded and are up nearly 5 percent on the day.
As mentioned, 2020 has been a big year for the electric car company. Its stock value has tripled since October. Meanwhile, Tesla is now worth more than both GM and Ford combined.
Funding Big Initiatives
The $2 billion in funding will help Tesla continue its electric run (pun intended) without compromise. It is currently working on ramping up its production of vehicles in the Chinese market. Meanwhile, Tesla is spending big on its first Gigafactory in Europe. The plant is being built in Berlin, Germany and is expected to start production sometime in 2021.
At the same time, Tesla is also pursuing non-vehicle endeavors. It recently announced that it is ramping up installations of Solarglass, its clean energy roofing tiles. The company is currently working to increase its reach in that area by planning an expansion into Europe and China.
While the move to offer new stock is a surprise, it isn’t necessarily a bad idea. Tesla is coming off of its first two profitable quarters in a while and is aiming to produce more than 500,000 cars in 2020. The influx of cash will help it strengthen its balance sheet moving forward and continue to innovate in many different areas.
Whether or not it will pay off remains to be seen. However, it seems like a solid business decision as Telsa looks to ride its current wave of momentum deep into 2020 and beyond.