Tesla will sell up to $5 billion of stock after nearly 670% gain in 2020

AP Photo/Susan WalshElon Musk.
  • Tesla said on Tuesday it will sell up to $US5 billion worth of its shares over time.
  • Elon Musk’s electric-car company said on Tuesday that it has signed up 10 banks to sell its common shares “from time to time” in an “at-the-market” or follow-on offering.
  • Tesla stock has soared more than 600% this year, lifting its market capitalisation to more than $US600 billion.
  • Critics of the company have suggested Musk capitalise on Tesla’s expensive shares.
  • Visit Business Insider’s homepage for more stories.

Elon Musk wants to make the most of Tesla’s eye-watering valuation. The automaker announced on Tuesday that it will sell up to $US5 billion worth of its stock over time.

Musk’s electric-vehicle company has struck an equity-distribution agreement with 10 banks including Goldman Sachs, Bank of America, and Morgan Stanley. They will act as sales agents and earn a commission, or buy the shares themselves, generating up to $US5 billion in aggregate sale proceeds for Tesla.

The shares will go on sale “from time to time” through an “at-the-market” or follow-on offering program. Tesla and the banks will decide how much stock is sold and at what price on a daily basis. The automaker will use the proceeds to bolster its balance sheet and fund its operations.

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Tesla’s stock price has skyrocketed more than 600% this year, boosting its market capitalisation to north of $US600 billion as of Monday’s close. The company earned about $US21 billion in revenue and only $US1.4 billion in operating income in the first nine months of this year.

The stark disconnect between Tesla’s size and its stock-market valuation has raised plenty of eyebrows.

Michael Burry — who famously made $US100 million betting on the US housing market to collapse and was portrayed by Brad Pitt in the movie adaptation of “The Big Short” — recently revealed he was shorting Tesla in a now-deleted tweet, and advised Musk to issue Tesla shares as that would be “cementing permanence and untold optionality.”

Chris Bloomstran, the boss of Semper Augustus Investments,recently tweeted that “Elon has managed to engineer one of the most overvalued currencies of all time.”

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