Amid Tesla’s incredible rise that has seen shares soar to new highs, the electric auto maker said Tuesday it will sell up to $5 billion in new stock. The additional shares will be sold “from time to time” and “at-the-market” prices, Tesla said in a filing with the Securities and Exchange Commission. It said banks will sell shares based on directives from Tesla.

“We intend to use the net proceeds, if any, from this offering to further strengthen our balance sheet, as well as for general corporate purposes,” Tesla said. The stock briefly traded in the green on Tuesday but moved lower throughout afternoon trading and ended the session 4.67% lower.

The decline hardly dents shares’ rapid appreciation this year. Through Monday’s close, the electric car maker has gained nearly 500% in 2020. In the last year, shares have gained 1,004% compared with the S&P 500’s 20% rise. Tesla’s run-up has only gained steam since the company announced its 5-for-1 stock split on Aug. 11. In that time, Tesla shares have rallied 81.3%.

That gain includes a 12.6% pop on Monday, when the split took effect. That rise came even though stock splits are purely cosmetic, meaning nothing about the company’s underlying business changes. Tesla’s market cap now stands around $464 billion meaning the new offering represents about 1% of the company’s value, according to FactSet.

Tesla said it has entered an equity distribution agreement with Goldman Sachs & Co., BofA Securities Inc., Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co., Credit Suisse Securities (USA), SG Americas Securities, Wells Fargo Securities and BNP Paribas Securities Corp. Those banks, which will act as sales agents, will get a commission of up to 0.5% of gross proceeds from each sale of Tesla shares, as well as reimbursement for certain expenses. The company said it could terminate the agreement at any time.

Todd Horwitz Chief Strategist BubbaTrading.com
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