Tesla Inc. announced on Friday that it priced its secondary common stock offering at $767 a share, a move that is expected to raise more than $2 billion. The electric vehicle maker will sell 2.65 million shares at this price, with CEO Elon Musk and Oracle billionaire Larry Ellison also participating in the offering.
Despite the slight 4.6% discount to its previous closing price, the offering is seen as a success, as Tesla’s stock has been on a significant uptrend, up 92% this year alone. The surprise announcement of the offering caused Tesla’s shares to slip 0.5% on Friday, following a nearly 5% gain the day before.
Goldman Sachs and Morgan Stanley, the lead underwriters, have the option to purchase an additional 397,500 shares in the offering. Tesla stated that it plans to use the proceeds to strengthen its balance sheet and for general corporate purposes.
Analysts were caught off guard by the capital raise, as Musk had previously stated that Tesla did not plan to raise any more capital. However, Evercore ISI analyst Chris McNally praised Tesla for issuing new equity, raising the firm’s target price to $550 a share.
Tesla also acknowledged in a filing that the coronavirus outbreak could impact its business, mentioning “health epidemics” as a risk factor for the first time. The company noted that the outbreak had briefly closed its Gigafactory in Shanghai. Despite these challenges, Tesla’s stock continues to be driven by market sentiment and demand for its products.