$2B+ Capital Raise: Everything We Need to Know (02.13.20)
Tesla Daily: Tesla News & Analysis
Rob Maurer
4.8 • 1.1K Ratings
🗓️ 14 February 2020
⏱️ 11 minutes
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Summary
Tesla announces intent to raise more than $2B in capital in a common stock offering despite denying any desire to raise capital just a couple weeks ago. Here is everything investors should know, pros and cons, how it impacts TSLA and the company moving forward.
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Music by Evan Schaeffer
Disclosure: Rob Maurer is long TSLA stock & derivatives
Transcript
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| 0:00.0 | Hey, Rob Maower here and today we are of course talking about Tesla's announcement that they will be raising an additional 2 to 2.3 billion dollars in cash, despite the fact that both CEO Elon Musk and CFO Zach Kirkhorn said on the Q4 earnings call a couple weeks back that they do not need to raise capital and that they had no plans to. |
| 0:24.0 | So we'll look at the financial impact, we'll look at why their thoughts on this might have changed, |
| 0:28.0 | and we'll look at how this impacts Tesla shareholders whether or not this is a good thing or a bad thing. |
| 0:33.2 | Starting off with the reason for why, Tesla says in the filing, quote, |
| 0:36.8 | we intend to use the net proceeds from this offering to further strengthen our balance |
| 0:41.0 | sheet as well as for general corporate purposes." |
| 0:44.7 | So a pretty generic comment there and the general corporate purposes I think gives Tessa |
| 0:48.8 | a lot of flexibility in terms of how they use this capital later on, so we'll talk a little bit more about those reasonings in a bit. |
| 0:54.4 | But first, let's look at how this actually breaks down |
| 0:56.3 | financially and the impact on Tesla's equity. |
| 0:59.3 | So how this capital raise will work is Tesla will create new shares, in this case 2.65 million to 3.05 million new |
| 1:06.8 | shares, and then they'll work with brokers to sell those shares into the market for a certain |
| 1:11.7 | price. The price that they specified in the prospectus as a hypothetical was the closing price on Tuesday, |
| 1:17.0 | so that was $767 per share. |
| 1:20.0 | However, of course today Tesla is up about 5% to $84 per share, and this is actually a really important |
| 1:26.4 | and good thing for this capital raise. |
| 1:29.1 | As Tesla continues to finalize this deal, I expect, fidelity that that 804 dollar share price |
| 1:34.9 | will be the price on the capital raise and that means Tesla can actually get a |
| 1:38.8 | little bit more capital than what was laid out this morning so as said, the offering was 2.65 to 3.05 million shares. |
| 1:47.2 | The additional shares are there in case brokersages end up oversubscribing, |
| 1:50.8 | and there is more demand for shares than can be fulfilled by that base |
| 1:54.0 | offering. I don't remember a time in Tesla's history where they have raised capital |
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