Tesla (TSLA) Plans To Raise $5B Via Share Bonanza; Stock Gains 3% In Pre-Market Trading

Tesla Inc. shares are up 3% in Tuesday’s pre-market trading even after the electric carmaker announced a plan to raise $5 billion through a share offering.

The stock is appreciating to $513 in the pre-market session after closing 13% higher on Monday. Tesla (TSLA) said that it has entered into an equity distribution agreement with a number of investment banks including Goldman Sachs, who will act as sales agents to sell shares, par value $0.001 per share, of its common stock. The electric carmaker’s plan is to raise an aggregate in sales proceeds of up to $5 billion, from time to time, through an “at-the-market” offering program

Under the terms of the equity distribution agreement, the sales agents may sell the shares by ordinary brokers’ transactions, in negotiated transactions, in block trades, and in transactions that are deemed to be an “at-the-market offering”. As of August 28, there were approximately 933,540,135 shares of Tesla’s common stock.

News of the offering comes just a day after Tesla’s 5:1 stock split went into effect. Following the move five-star analyst Daniel Ives at Wedbush adjusted his price target to $380 (24% downside potential) with a bull case PT of $700.

“We believe the stock split decision was a smart move by Tesla and its Board given the parabolic move in shares over the past six months, with another stock split by Apple and likely other larger tech stalwarts will follow this same path over the coming months in our opinion” Ives wrote in a note to investors. “For Tesla, the next major catalyst for shares will be Battery Day next month on September 22, followed by 3Q deliveries which thus far looks slightly ahead of Street expectations heading into the last month of the quarter.

However, with shares up a stellar 496%, Ives maintained a Hold rating on valuation. Meanwhile, the $278.84 average analyst price target now implies 44% downside potential for the shares in the coming 12 months.            

The rest of the Street is in line with Ives’ stock outlook with a Hold analyst consensus. (See Tesla’s stock analysis on TipRanks)

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