As Tesla (TSLA) is reaching new, insane levels of market capitalization, some suggest that it could be a good idea to again raise money and try to accelerate its effort to build more electric vehicle and battery production capacity.
That’s after CEO Elon Musk said that Tesla wouldn’t raise money again, but the automaker couldn’t resist after its stock price surged, allowing it to raise money at a lower dilution for current investors.
But now Tesla’s stock has surged again following the announcement of its inclusion in the S&P 500.
Tesla’s stock price (TSLA) is up 45% since its last capital raise just a few months ago:
The last two capital raises weren’t linked to any particular project like the company’s previous capital raises.
Instead, the automaker said that it would use the money to improve its balance sheet.
At the end of the last quarter, Tesla had a record amount of cash and cash equivalent on its balance sheet: $14.5 billion.
I can definitely see the appeal of a capital raise at this kind of valuation, especially considering the timing with the S&P inclusion.
Tesla could issue $10 billion worth of shares with minimal dilution and help the the S&P fund buy the stake for the inclusion in the index.
On the other hand, Tesla doesn’t really need the money with $14 billion in the bank.
It would need a clear project to put the money toward and help accelerate its plan for new battery and electric vehicle factories.
But Elon has previously said that Tesla is spending money as fast as it can without wasting it.
Therefore, it sounds like profitability is a bigger priority and Tesla would have to introduce the new strategy to investors, meaning telling them that they are going to raise a ton of cash and spend it faster to try to accelerate the deployment of production capacity.
When it comes to the 4680 battery production, Tesla still needs to get its pilot plant tuned for higher volume production before it can invest massively into a full-scale facility.
So again, maybe more money wouldn’t even accelerate battery production.
One thing I thought about is that Tesla could make some acquisitions to take control of some companies and have them accelerate the mission by adjusting a few things at those companies.
For example, Tesla could help finance some new mining projects for nickel, lithium, and other resources.
What do you think about the potential of Tesla doing a new capital raise? What do you think they could do with the money? Let us know in the comment section below.
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Author: Fred Lambert