Tesla Plans $5 Billion In Share Offerings, But Some Analysts Warn Stock Is Overvalued

Tesla Inc. (TSLA) plans to offer up to $5 billion of its shares after the stock has surged this year.

In a filing with the Securities and Exchange Commission, the electric vehicle maker said it will offer shares “from time to time” at market prices.

Net proceeds from such sales will be used “to further strengthen our balance sheet, as well as for general corporate purposes.”

The new sales program would be the largest equity offering by Tesla, Bloomberg reported, if it sells a minimum of $2.34 billion of shares.

Up until now the company has raised about $14 billion over the past 10 years through secondary stock offerings.

Meanwhile, Tesla shares have enjoyed a stupendous trajectory – the stock has soared nearly 500% year-to-date on a split-adjusted basis. (Tesla recently enacted a five-for-one stock split).

Over the past year the shares have skyrocketed by more than 1,000%.

The company has delivered four straight quarters of profits – which would qualify it for inclusion in the S&P 500 index.

Tesla now has a market cap of $460.3 billion – having surged from $40 billion in September 2019.

Dan Ives, an analyst at Wedbush, called the planned share sales a “smart move,” citing that investors are eager to “play the transformational [electric vehicle] trend through pure-play Tesla over the coming years,” CNBC reported.

Ives added that CEO Elon Musk is “raising enough capital to get the balance sheet and capital structure to further firm up its growing cash position and slowly get out of its debt situation, which throws the lingering bear thesis for Tesla out the window for now.”

But Wedbush has a “neutral” rating on Tesla stock and a base price target of $380.

Some analysts worry Tesla stock has run up too high and warn of a correction.

Miller Tabak chief market strategist Matt Maley said investors who buy shares in the new $5 billion equity offering “are going to get burned.”

“Even if this stock rallies a bit more over the next week or two, it’s going to be trading at least 30% below today’s level before the end of the year in our opinion,” he added.

On Monday evening, RBC reiterated its “underperform” rating on Tesla stock, calling it “fundamentally overvalued.”