Tesla Announces 2 Trillion KRW Rights Offering as Stock Price Rises

"No Need for Funds" Contradicts Musk CEO Statement
Stock Price Falls on Capital Increase News but Successfully Rebounds

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Electric vehicle company Tesla announced on the 13th (local time) a $2 billion (approximately 2.365 trillion KRW) rights offering. It is understood to be a decision to raise the necessary funds amid a surge in stock prices, but the market saw the stock price fluctuate significantly due to the sudden announcement of the capital increase.

According to CNBC on the 13th (local time), Tesla signed a subscription agreement for 2.65 million new shares with investment banks Goldman Sachs and Morgan Stanley. The amount to be raised is $2 billion, but with an additional $300 million issuance option, the total capital increase could reach $2.3 billion. The planned issue price for the new shares is about $750, which is below the current stock price of approximately $800.

Tesla stated in a press release that CEO Elon Musk plans to purchase $10 million worth of shares, and Larry Ellison, Tesla board member and Oracle founder, is expected to acquire up to $1 million worth of shares.

Tesla explained, "The funds raised will be used to strengthen the balance sheet along with overall business purposes," but U.S. media pointed out that this contradicts Musk’s recent remarks, where he drew a line against additional fundraising.

Two weeks ago, Musk stated, "It doesn’t make sense to raise funds because we expect to generate cash."

Following the sudden news of the capital increase, Tesla’s stock price started lower but managed to reverse and rise during trading. The stock fell sharply by 7.2% in pre-market trading and dropped 4% in early trading, but turned to a 4% gain in the afternoon.

Tesla’s stock price surged 120% over the past three months and 225% over the past six months. Recently, it even soared about 20% in a single day but has been adjusting after touching $900. Due to the steep rise in stock price, concerns about a bubble have also emerged.