Tesla plans capital raise after share surge

Tesla’s top-of-the-line electric vehicle range, including the Model S, has propelled its share price to a near six-fold increase this year. (Shutterstock)
Short Url
Updated 02 September 2020

Tesla plans capital raise after share surge

  • Decision hailed as ‘smart move’ while interest in world’s most valuable car company soars

LONDON: Tesla Inc. unveiled its biggest program of new share sales in a decade as a public company on Tuesday, seeking to cash in on soaring Wall Street interest in the company to raise $5 billion that will ease future debt pressures.

The move comes a day after a 5-for-1 stock split took effect, Tesla’s first since its initial public offering a decade ago, and follows a nearly six-fold increase in the value of its shares this year.

Several major banks, including Goldman Sachs & Co, Bank of America Securities Inc, Citigroup Global Markets Inc. and Morgan Stanley & Co, will conduct the sale, the company said in a filing, giving no deadline for its completion.

Tesla shares, which rose about 8 percent in early premarket trading, retreated to trade about 3 percent higher on the day after the news.

The company’s high-flying stock has risen another 70 percent since the split was announced on Aug. 11, and was trading at over $2,000 before the division on Friday.

With a market capitalization now around $465 billion, it became the world’s biggest car company by value in July and has propelled CEO Elon Musk’s personal fortune past $100 billion.

Musk has repeatedly assured investors over the past year that Tesla would not need to raise more money for costly initiatives including the construction of its first European factory and its recently announced construction of a new factory near Austin, Texas.

However, Tesla in February had already announced plans to raise $2 billion in a stock offering.

The company said on Tuesday it plans to use the proceeds to strengthen its balance sheet and for general corporate purposes.

Wedbush analyst Dan Ives called Tesla’s decision to raise money a smart move at the right time for the company.

“Now in a clear position of strength and out of the red ink, Musk and his red cape are 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,” he said.


Demand issues ‘to overshadow OPEC+ supply next year’

Updated 29 October 2020

Demand issues ‘to overshadow OPEC+ supply next year’

  • Libya's rising production adding to pressure on oil markets

DUBAI: The Organization of the Petroleum Exporting Countries (OPEC) and its allies will have to contend with a “lot of demand issues” before raising supply in January 2021, given throughput cuts by oil refiners, the head of Saudi Aramco’s trading arm said.
OPEC and its allies plan to raise production by 2 million barrels per day (bpd) from January after record output cuts this year as the coronavirus pandemic hammered demand, taking overall reductions to about 5.7 million bpd. 

“We see stress in refining margins and see a lot of refineries either cutting their refining capacity to 50-60% or a lot of refineries closing,” Ibrahim Al-Buainain said an interview with Gulf Intelligence released on Wednesday.

“I don’t think the (refining) business is sustainable at these rates (refining margins).”

However, Chinese oil demand is likely to remain solid through the fourth quarter and into 2021 as its economy grows while the rest of the world is in negative territory, he added.

Among the uncertainties facing the oil market are rising Libyan output on the supply side and a second wave of global COVID-19 infections, especially in Europe, on the demand side, Al-Buainain said.

Complicating efforts by other OPEC members and allies to curb output, Libyan production is expected to rebound to 1 million bpd in the coming weeks.

Oil prices, meanwhile, fell over 4 percent on Wednesday as surging coronavirus infections in the US and Europe are leading to renewed lockdowns, fanning fears that the unsteady economic recovery will deteriorate.

“Crude oil is under pressure from the increase in COVID-19 cases, especially in Europe,” said Robert Yawger, director of energy futures at Mizuho in New York.

Brent futures fell $1.91, or 4.6 percent, to $39.29 a barrel, while US West Texas Intermediate crude fell $2.05, or 5.2 percent, to $37.52.

Earlier in the day Brent traded to its lowest since Oct. 2 and WTI its lowest since Oct. 5.

Futures pared losses somewhat after the US Energy Information Administration (EIA) said a bigger-than-expected 4.3 million barrels of crude oil was put into storage last week, but slightly less than industry data late Tuesday which showed a 4.6 million-barrel build.

However, crude production surged to its highest since July at 11.1 million barrels per day in a record weekly build of 1.2 million bpd, the data showed.

Gasoline demand has also been weak overall, down 10 percent from the four-week average a year ago. US consumption is recovering slowly, especially as millions of people restrict leisure travel with cases surging nationwide.