Published: Mon, February 17, 2020
Markets | By Otis Pena

Tesla slumps as it announces $2bn stock offering

Tesla slumps as it announces $2bn stock offering

Shares of Tesla Inc. dropped 2.6% in premarket trading, after the electric vehicle maker disclosed that its previously announced common stock offering priced at a discount of almost 5%.

The majority of the cash will be raised through the $2 billion public offering, while the sale's underwriters have a 30-day option to purchase an additional $300 million worth of common stock.

Tesla CEO Elon Musk may finally get his huge paycheck by mid-spring if shares of the electric carmaker stay stable and the company manages to keep its average market cap above $100 billion.

Tesla priced its secondary common stock offering at $767 a share, the business said on Friday, in a move which will probably largely be regarded as a success as it's simply a small reduction to its previous closing price. Larry Ellison, a Tesla board member and the co-founder of software giant Oracle, will also buy as much as $1 million in shares, the automaker said. The share price opened lower Friday, jumped as high at $812.97 and has hovered around $802.

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The stock offering conflicts with statements Musk and CFO Zach Kirkhorn made last month during Tesla's fourth-quarter earnings call.

Tesla says it plans to use the cash to strengthen its balance sheet and for general corporate purposes. In a separate presentation on Thursday that was published before the stock offer notice, Tesla said capital expenditures could reach up to $ 3.5 billion this year. At that time, Musk said the company was spending money sensibly and that there is no "artificial withholding of expenses".

Tesla shares rose 5 percent on the news in the wake of volatile trading in recent weeks that has seen the company's market value more than double in the past two months.

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