Tesla opened up a new round of capital investment by offering up to $5 billion in stock to investors. The EV automaker filed notice with the SEC last Tuesday that it will sell shares via at-the-market (ATM). ATMs allow companies to sell new shares through brokers at market rates. This can take place over a period of time. The filing mentioned ten banks will help with sales: Goldman Sachs, BofA Securities, Barclays Capital, Citigroup Global Markets, Deutsche Bank Securities, Morgan Stanley, Credit Suisse Securities, SG Americas Securities, Wells Fargo Securities, and BNP Paribas Securities.
The company said proceeds will help strengthen its balance sheet. There are also plans to build new factories in Germany and Texas, USA, as well as launch new vehicle lines.
The 5 to 1 stock split sustained appetite for demand, and now retail investors can get in on the action. Aimed to make shares more affordable for smaller investors, the split did that and more on day one. Stock prices rose 12% to $498 per share and even hovered a bit on the $500 range before settling down a bit lower. Even the news of a stock split created demand. Since the announcement on August 11, Tesla stock has risen to 80%. Considering splits do not change company directions, the demand is nothing but remarkable.
World’s Most Valuable Car Company
At present value, the $5 billion capital plan represents around 1% of Tesla's total shares. The company is one of this year's big winners despite trying conditions caused by Covid-19. Earlier, the lone US plant in California had to shut down for a while as the outbreak raged. Despite the setbacks, the company posted a fourth successive profitable quarter. A lineup of new cars plus a promising update on battery performance also helped stoke demand. The stock closed at $83.67 (split-adjusted) on the last day of 2019 and is now at $475.05. That's at least five times over its value last year in under 9 months. As of August, Tesla is the world’s most valuable car company with a market cap of $256.1billion. This is bigger than the combined market cap of Toyota ($185.1 billion) and Ford ($28.76 billion). It is also higher than the total market cap of Volkswagen, Daimler, Ferrari, and BMW ($234.7 billion).
Why is the stock so high in demand? Forget the stock split, valuations, projections, or even CEO Elon Musk's personality. Forbes attributes Tesla's success to a simple answer: people want to buy their cars. And as Tesla's EV technology continues to improve, the reality gets closer to people who want an EV.
And making electric cars is what Tesla is good at. Outside of Models S, 3, X, and Y (we're on to you, Elon!), the company unveiled new vehicles that cater to different segments. There is the Roadster sports car with SpaceX add-ons that make it even faster. The Cybertruck pickup is for those who need more trunk space. Finally, there is the Semi, a commercial-grade tractor truck that can perform long hauls.
S&P 500 Inclusion
Tesla also made news last July when its latest quarterly performance made it eligible to join the S&P 500. To join, a company must be from the US, trade in the NYSE, Nasdaq, or Cboe, has an $8.2 billion or more cap, and have four straight profitable quarters. The company reported EPS of $2.18 vs a predicted loss of 15 cents, and revenue of $6.04 billion vs $5.2 billion expected.
Despite its qualified status, joining the S&P 500 is not guaranteed. The next committee meeting to rebalance the index is set on September 18. Of course, the index can add or remove companies at any time. The committee, though, usually takes their time before adding new entries to the list.
Watch this as Tesla offers $5 billion new stock via at-the-market rates:
With an ATM offering, and stocks priced much lower due to its split, smaller investors now have a chance to get their hands on Tesla stock. Given this opportunity, are you planning on acquiring Tesla stock? Do you think it's a good buy, or is it too late to join the party? Let us know what you think by commenting below.
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