Tesla retreats from record highs after announcing share sale of up to $5 billion
- Tesla retreated from record all-time-highs on Tuesday after the electric vehicle manufacturer announced a $5 billion "at-the-market" share offering.
- The "at-the-market" offering allows Tesla to sell up to $5 billion worth of stock directly into the public markets at its discretion, taking advantage of potential price swings on specific days.
- The share offering comes one day after Tesla's market value surpassed Berkshire Hathaway and crossed $600 billion, making it the sixth largest publicly listed US company.
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Tesla shares retreated from all-time-highs on Tuesday after the electric vehicle manufacturer announced a $5 billion "at-the-market" share offering.
The offering came a day after Tesla crossed $600 billion in market value, making it the sixth largest publicly listed US company, ahead of Berkshire Hathaway and behind Facebook.
Tesla, which surged 7% in Monday trades, fell as much as 4% in premarket trading on Tuesday to $616.00. The stock pared most of those losses and traded down just 1% as 8:01 A.M. Prior to the announced offering, Tesla traded up as much as 4% to an all-time-high of $668 in pre-market trades on Tuesday.
Tesla CEO Elon Musk is taking advantage of a soaring stock price to help fund its growth initiatives. Shares of Tesla were up 666% year-to-date as of Monday's close, as investors continue to pay a premium for automakers solely focused on developing, manufacturing, and selling electric vehicles.
This share sale would mark Tesla's third equity raise so far in 2020. The company raised about $2 billion in February, and about $5 billion in September.
An "at-the-market" share offering is different from a traditional equity share offering. Rather than selling a specific lot of shares at a pre-determined price in one fell swoop, an "at-the-market" offering allows Tesla to, at its discretion, sell bits and pieces of its stock directly into the market to raise up to $5 billion.
The at-the-market offering will allow Tesla to take advantage of recent volatility in its stock price and is beneficial in the sense that the offering could lead to less dilution than a traditional offering if Tesla is able to sell shares at favorable prices.
Tesla is not required to sell all or any of the $5 billion worth of shares, and the company will likely have at least a year to execute the offering before it expires.
One of the lead underwriters of the offering who will facilitate the sale of stock at Tesla's discretion is Goldman Sachs, who just last week upgraded Tesla from Neutral to Buy and set a street-high price target of $780.