Tesla’s $5 billion dollar stock offering earlier this month marks a significant milestone in the company’s capital raising journey. Since its IPO in June of 2010, Tesla’s stock price has gone from $17 per share, for a market capitalization of about $1.7 billion, to its current price of $449 per share (after a 5-for-1 stock split), and a market capitalization of $419 billion. By any measure, Tesla’s ascendence is remarkable.
Still, it’s reasonable to ask why Tesla is coming to the market yet again with a stock offering. After all, Tesla has been periodically issuing shares ever since it became a public company. For instance, in May of 2016, Tesla issued 6.8 million new shares and raised $1.46 billion in what at the time was its largest offering. And that amount was surpassed on February of this year, when Tesla went to the market again and raised another $2.31 billion.
So why now? The answer is simple – Tesla needs money.
Tesla has always needed money and liquidity to boost its investment in its plants, and in particular its famous Gigafactories. And as it continues with the mass production of the Model 3 and future introduction of new models, its needs are probably greater than ever. In 2010 Tesla had about $114 million in property, plant and equipment; by the end of 2019, that amount grew to $10.4 billion.