Tesla (TSLA) Stock Surges as Elon Musk Ponders Bond Sale
Shares of Tesla Inc. (TSLA) surged on Thursday amid news that the electric car maker was looking to shore up its cash on hand through a multi-billion-dollar bond sale. Could this be the end of Tesla’s woes?
Tesla Looking to Raise Capital
As The Wall Street Journal reported Thursday, Tesla could raise as much as $2.3 billion through a forthcoming bond sale and public offering of roughly 2.7 million shares. The proceeds would work out to around $642 million via public offering and an additional $1.35 billion in convertible senior notes due in five years’ time. The amount raised could swell to $738.7 million from the stock offering and $1.55 billion from the bond sale should underwriters exercise their full options.
Talks of a new fundraising initiative picked up last month after Tesla reported one of its worst quarterly losses in history. For the first quarter of 2019, the company reported an adjusted loss per share of $2.90, far exceeding the $0.69 loss analysts had expected. Revenues were $4.54 billion versus $5.19 billion expected.
Taking unadjusted figures into account, Tesla lost $702.1 million during the quarter, which works out to $4.10 a share.
Back in early April, the company warned that first-quarter results will be adversely affected by “lower than expected delivery volumes and several pricing adjustments.” The company delivered just 63,000 cars in the quarter ending March 31, well below the expected 76,000.
Stock Rebounds, but for How Long?
Shares of Tesla surged more than 5% in pre-market trading Thursday, helping to stem a brutal year-long slump for the automaker. TSLA is down more than 20% year-to-date and 30% from its January peak. Over the same stretch, the Nasdaq Composite Index has gained more than 21%.
Despite being one of the most exciting investments, Tesla remains one of the most volatile large-cap stocks. Investors weighing the possibility of owning TSLA can take comfort in knowing that the International Energy Agency (EIA) expects there to be as many as 220 million electric vehicles on the road by 2030. The IEA’s low estimate is 125 million units by 2030. So far, no other company has put more effort into leading this transformation than Tesla.
That being said, Tesla’s fortunes could be tied to its creator, and this may not be a good thing. Elon Musk has been heavily criticized for his erratic behavior and poor decisions. This goes beyond the Twitter tirades. Musk’s decision to purchase Solar City is still under scrutiny over accusations that he misrepresented the company’s value. It also took a disastrous first-quarter earnings call to convince Musk that Tesla needs to raise additional cash to cover its shortfalls.
As far as TSLA itself, the stock trades at nearly 33 times forecast earnings, which is well above its automotive competitors and more than 50% higher than Alphabet Inc. (GOOG), another industrial giant entering the market for autonomous vehicles.
Disclaimer: Author holds no investment position in Tesla at the time of writing.
Featured image courtesy of Shutterstock. Chart via Yahoo Finance.