Tesla Inc (NASDAQ: TSLA) is having an overwehlmingly strong start to the trading session this morning after announcing that it would be raising funds by issuing shares and convertible debt. In general, news like this would cause declines, but investors are excited. Today, we’ll talk about:
- Why excited investors are pushing the stock up;
- what we’re seeing from TSLA stock; and
- what we’ll be watching for ahead.
TSLA Gains On Capital Raise
As mentioned above, Tesla is having an overwhelmingly strong start to the trading session this morning after announcing a capital raise. The announcement comes after posting a huge first quarter loss and saying that the company needs cash.
Nonetheless, TSLA plans on raising the cash it needs. In a press release issued this morning, the company announced that it plans on raising nearly $2 billion billion in an offering of newly issued shares and convertible notes.
In the announcement, the company said that it would be raising $650 million through the issuance of stock. Moreover, the company plans on raising an additional $1.35 billion through convertible senior notes. The notes will be due in 2024 and the fund raise will happen through two separate offerings.
In general, news like this would send a stock tumbling. However, that’s not the case for TSLA. In fact, the stock is making a run for the top. Why? Well, it’s likely because the CEO, Elon Musk, disclosed that he would be purchasing $10 million in stock under the offering.
While most offerings cause declines, most CEOs don’t participate. With Musk putting $10 million of his own money into the pot, investors seem to be excited for the future.
Nonetheless, this may be a short term remedy if the company doesn’t get to profitability soon. In fact, in the first quarter, the company’s cash balance shrunk by $1.5 billion to $2.2 billion. Even with the offering, the company will only have about $4 billion on the books. At the current rate of cash burn, that would leave the company struggling again within the fiscal year. Nonetheless, investor excitement is taking hold today.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to work in the market is that the news leads to moves. When it comes to TSLA, the news was mixed. Sure, funds are being raised, which is a swift kick, but the CEO is buying in, and that is exciting investors.
So, it’s not surprising that these excited investors are pushing the stock on a run for the top. As is just about always the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (8:32), TSLA is trading at $245.31 per share after a gain of $11.30 per share or 4.83% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on TSLA. In particular, we’re interested in following the story surrounding the company’s continued work to bring value to investors. Nonetheless, we’ll keep a close eye on the news and bring it to you as it breaks!
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