Will Tesla’s Stock Offering Need to Discount Shares to Attract Investors?

A Tesla Model S and Model X are displayed at a shopping mall in Hong Kong

A Tesla Model S and Model X are displayed at a shopping mall in Hong Kong

Last month Mr Musk said the company expected to make its own money from now on and had been spending "sensibly".

Tesla shares initially fell 7pc as the markets opened on Thursday but recovered their losses and rose more than 5pc later in the day.

The underwriters will get an option to buy up to $300 million in additional shares.

Mr Musk is set to buy up to $10m and Oracle co-founder and Tesla board member Larry Ellison $1m as part of the sale.

The revelation comes just two weeks after Mr Musk insisted raising capital "doesn't make sense" for the company. It looks like the company's monster rally changed his mind. The consensus price target on the stock is $457.20, and an average daily trading volume is 15.58 million shares, almost six times the number of new shares Tesla plans to sell.

Tesla's stock is up despite the bad news. Perhaps most notably, he claimed that Tesla wouldn't issue more shares to generate cash. And then despite all that, we are still generating positive cash.

"It doesn't make sense to raise money", Musk said during a January 29 earnings call when an investor asked why Tesla does not take advantage of its favourable share price to accelerate production.

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Tesla's stock has soared after fourth-quarter earnings.

Electric vehicle maker Tesla has announced plans to offer around $2bn of common stock. These shares are worth approximately $10 million and $1 million at current prices.

Tesla CEO Elon Musk said last month during an investor call that the company wouldn't be seeking to raise more cash. The potential circa 2.65m shares is only around 1.5% dilutive to the share count.

If the average price of Tesla stock stays at Tuesday's closing price of $774.38 for the next several months, the stock could achieve that $100 billion average over a six-month period as soon as April 17.

The electric auto maker said it plans to use the proceeds from the offering to strengthen its balance sheet and for general corporate purposes.

As of Tuesday's close, the company's market value stood at $139.6 billion, making it the second most valuable automaker in the world behind Toyota. The agency sued Musk in 2018 after he said he had secured the financing necessary to take Tesla private, alleging that Musk was not as close to acquiring funding for the deal as he indicated.

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