Tesla plans to raise $2 bn in stock offering

NEW YORK: Tesla Inc made an about-turn on Thursday by announcing plans to raise $2 billion in a stock offering as the electric-car maker taps into an astronomical jump in its share price in the past few months.

Chief executive Elon Musk has repeatedly assured investors that the company will not need to raise more money.

As recently as last month, Musk said: “It doesn’t make sense to raise money. Diluting the company to pay down debt doesn’t sound like a wise move.” The company said it would offer 2.65 million shares, of which Musk himself will buy up to $10 million in shares. Board member and Oracle co-founder Larry Ellison will purchase $1 million Tesla shares.

Tesla’s shares fell as much as 7% in premarket trading after having tripled since October when the company posted a rare quarterly profit. Its market capitalisation is now worth more than the combined value of General Motors and Ford Motor.

“Despite Musk’s bravado about Tesla’s finances, the company needs billions of dollars to finance growth,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “He is smart to grab cash by selling stock at a skyhigh price he might not see six months from now.”