Tesla Cashes in on Surging Stock

Can you ever have too much money? Apparently not, if you’re Tesla.

A day after completing a five-for-one stock split, the electric vehicle giant announced plans for a $5 billion capital raise to take advantage of surging demand for its shares.

Under the plan, the carmaker will sell new shares of common stock through 10 leading financial institutes. No timeline was provided for completing the sale.

What’s it For?

Tesla says it doesn’t have any immediate plans to use the money, other than to strengthen its balance sheet and “general corporate purposes.” CEO Elon Musk previously has said the company wouldn’t need to raise any capital to pay for its ambitious growth plans, which includes several new products and constructing factories in Germany and Texas.

Tesla already has a ton of money to play with. In its second-quarter financial filings, the company reported having $8.6 billion cash and cash equivalents on hand at the end of June.

For now, Tesla plans to invest proceeds from the stock sale in highly liquid assets, including U.S. government securities. The company also is expected to use the infusion to reduce its debt load.

2020 4X Vision

Tesla’s stock price soared more than 400% in 2020 and was trading at nearly $2,000 per share prior to the stock split—the first since the company’s initial public offering a decade ago. The new shares closed at $498.32 on Monday but fell to $475 on Tuesday.

Earlier this year, Tesla raced past Toyota to become the world’s largest carmaker by market value. It currently has a market capitalization of $465 billion—about twice that of Toyota’s. Analyst, however, point out that this is 16 times Tesla’s projected revenue and exponentially greater than its likely net income.

As for Musk, the recent stock surge has pushed his net worth over $100 billion. That makes him the fifth-richest person in the world, according to Forbes.