Tesla Shares Shoot Higher After Big Plan is Revealed to Raise $2 Billion

02:23 05/04/2019

Shares of electric vehicle maker Tesla TSLA  were on the rise after Wall Street learned this week that the company is planning to raise $2 billion from investors through new equity and convertible notes.

$1.35 billion will be coming from convertible notes and $650 million from new equity.

The plan also includes a hefty $10 million purchase from CEO Elon Musk. Musk has signaled that he plans to buy around $10 million of the company's stock in the new offering.

According to InsiderScore.com, purchases made by the CEO have acted as reliable short-term buy signals for Tesla.

A filing revealed that Musk signaled his intent to buy about $10 million of the electric auto maker’s stock in the new offering. This would mean a purchase of 41,896 shares.

According to data from FactSet, before the offering, Musk owned about 20% of Tesla’s outstanding shares, worth about $12.6 billion.

“I don’t think raising capital should be a substitute for making the company operate more effectively,” Musk said recently to Tesla shareholders. “I do think there is some merit to raising capital, but this is sort of probably about the right timing.”

'Well, I think that what you should take away is, is that when you think a company can't get financing, remember Tesla because Goldman Sachs--the Goldman Sachs I worked at--would not have a sell in the research department and do the underwriting,' said Mad Money host Jim Cramer.

'It just wouldn't happen. When I was working at Goldman, there was a research guy who said, listen, Jim, that's a sell and I brought in a very big underwriting and the underwriting was killed, goes to the analyst, wouldn't get behind it. Now the analyst is against it and they do the underwriting. It's pretty telling how things have changed.'

Tesla recently missed expectations on its first-quarter earnings as demand fell for its electric cars.

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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