Tesla Announces a $5 Billion Share Offering

Emmanuella Nwokenkwo & Javier Frausto

Tesla announces to sell $5 billion of additional common stock under an equity distribution agreement after the 5-for-1 stock split. The additional shares will be sold “from time to time” and “at-the-market” prices, and banks will sell shares based on directives from Tesla.

An equity distribution agreement is a private placement share allocation agreement between a company and its shareholders. This agreement is a way for the company to raise capital, through debt. Basically a credit line distributed by the lenders.

On September 1, through regulatory filing, the company entered an equity distribution agreement with a multitude of banks including: BofA Securities (BAC), Citigroup (C), Goldman Sachs (GS), Deutsche Bank (DB), Morgan Stanley (MS), Credit Suisse (CS), SG Americas Securities (SCGLY), Barclays Capital (BCS), Wells Fargo Securities (WFC), and BNP Paribas Securities (BNPQY).

Sales agents of Tesla(TSLA) are collecting sales proceeds of up to $5.0B "Upon delivery of a placement notice and subject to the terms and conditions of the equity distribution agreement, the sales agents will use reasonable efforts consistent with their normal trading and sales practices, applicable state and federal laws, rules and regulations, and the rules of the Nasdaq Global Select Market to sell the shares from time to time based upon Tesla's instructions for the sales, including any price, time or size limits specified by Tesla," the filing stated.

Tesla plans to improve the balance sheet with this capital.

On Monday night RBC Capital analyst Joseph Spak stated its underperform rating on the stock, calling the automaker “fundamentally overvalued.” With that being said, he did raise his one-year price target from $170 to $290.

Disclosure: At the time of publication, we are long Tesla. We wrote this article ourselves, and it expresses our own opinions. We are not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article. 

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Comments (3)
No. 1-2

^^you never know what you're gonna get with Tesla!

Nikhil Gunderia
Nikhil Gunderia

Interesting decision to call the stock overvalued and then raise the price target