Why Tesla Stock Fell Thursday and Where It Could Head Next

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Tesla announced in a statement Thursday morning it will raise $2.3 billion of equity capital, although the company did not disclose further details relevant to the financing.

Tesla shares fell 4.33% to $734.05, as the financing was almost completely unexpected. Not only did Founder and CEO Elon Musk say a few weeks ago it would not be practical for Tesla to raise money, but the company has turned profitable, and by a wider margin than analysts had forecasted.

Adjusted earnings per share for the quarter ended December came in at $2.14, beating Wall Street estimates of $1.77 and growing 7% year-over-year. Revenue was $7.384 billion, beating analyst's estimates of $6.99 billion and growing 17%. Free cash flow was $1 billion, beating estimates of $429 million.

Tesla said it’s using the cash to strengthen its balance sheet and for “general corporate purposes,” but didn’t offer any other details.

Here’s what Tesla investors need to watch for now:

How many shares are being issued? A higher share count means share price dilution, which is why the stock fell Thursday.

What specifically will the cash be used for? Tesla has several upcoming investments, with the largest one being the company’s China gigafactory, essentially to the company’s ambitions to expand into the promise Chinese electric vehicle market. Maybe the cash will be used to up current production estimates and serve an even larger market than expected.

In that case, this might be net positive for the share price.

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