Tesla Raised 5 Billion Dollars from Selling Shares
In my last video, I spoke about why I thought Tesla was making a genius corporate cum marketing move by announcing that they INTEND to raise $5bn through selling their shares in the future.
Honestly, I always thought this is just a power move but I never thought will ACTUALLY execute it so soon. Four days after they made the announcement, now they are completing the sale of $5bn worth of shares.
In response to that, Tesla shares are down around 9% in pre-market.
Once again, this teaches us as investors to INVEST and NOT SPECULATE the market.
While I thought that the equity raise is a power move and it is generally positive for Tesla, I didn’t buy shares of Tesla or did any options trade.
Why?
If I were to invest in Tesla, it has to be an INVESTMENT decision. Not an IMPULSIVE decision.
Equity raise or not, it should not affect my thoughts on Tesla as an investment.
If I speculated on that news and bought into Tesla, I will be down 9% straight from the gate.
So What is Happening to Tesla?
So with the new shares issued and Tesla down 9%. However, Tesla has around 740million shares (I am counting just the FLOAT, not the total shares), the dilution factor is around 1%!
The big question is WHY THE 9% DROP?
Honestly, I will say this, “I DON’T KNOW”
But I will share my opinion and you can take it for what it is worth. This is not investment advice (duh!)
With the $5bn raise through selling shares, one key information is MISSING.
What is Tesla going to use it for?
In my other video, I “speculated” that they can do a few things:
- Pay down their debt and reduce interest payment
- Use it as capital to build more Gigafactories
- Providing more shares for the SP500 inclusion
- Invest into other areas of expansion such as Autonomous Driving and Tesla Energy Business
- Keep as rainy day fund
With the SP500 inclusion out of the window (another blog post on that), we are left with 4 other plausible reasons. And my best guess will be to build more Gigafactories.
Tesla is currently facing increasing demand in their global sales and they want to meet that demand before other EV makers come in. (Yes, when your customers are yearning for a product, if you don’t give to them, they will go elsewhere)
Tesla is currently building Gigafactories in Germany, US and China to ramp up local capacity instead of relying on US factories. With the high share prices, this is perhaps the best way to fund these capital expenses.
So shouldn’t the market REJOICE over this?
Not really. Because Tesla did not explicitly mention the use of these funds.
With the recent exclusion from the SP500 and the long weekend break in the US markets, the $5bn raise was simply too much bad news for the market to take in and (as usual) the market overreacts with a 9% drop in share price.
So What to Expect From Here?
The next big thing for Tesla will be Battery Day which is on 22 Sep. I think there will be some big announcement for Battery Day as Elon Musk has been talking about it on Twitter!
**As of writing, the market is not opened yet on 8 Sep. Premarket Tesla is down 9%**
Invest Safely!
