Tesla is planning to raise another $5 billion from Wall Street, the company announced in a Tuesday morning filing with the Securities and Exchange Commission. It will be the company’s third round of fundraising this year and will bring its 2020 fundraising to $12 billion.
It’s a good time for Tesla to raise money because Tesla’s stock price hit a record high of $640 on Tuesday—a more than seven-fold increase since the start of 2020. Tesla’s market capitalization is now around $600 billion, which means that Tesla’s existing shareholders will give up less than 1 percent of their stake from the stock sale.
Still, investors didn’t seem thrilled at the news, with Tesla’s share price down a little more than 1 percent in morning trading.
In previous years, Tesla was perpetually short of funds and needed to sell stock to stave off bankruptcy. That’s no longer the case. Tesla’s most recent financial disclosure showed the company with almost $15 billion cash in the bank. Tesla is likely to end the calendar year with a $20 billion war chest. That’s plenty of money even in the capital-intensive automotive industry.
The big question now is how Tesla is going to spend all of that cash to boost output and justify Tesla’s astronomical valuation. Tesla’s $600 billion valuation makes it almost three times as valuable as Toyota and nearly 10 times as valuable as GM. Yet Toyota and GM ship an order of magnitude more cars each quarter. The market is clearly expecting Tesla to massively increase its manufacturing capacity in the next few years.
Tesla is working to do that, with factories under construction near Berlin and in Austin, Texas. Tesla also recently began production at a factory in Shanghai. But four factories still isn’t enough to make Tesla a top-tier automaker. We can expect the company to announce additional investments in 2021.
Tesla also needs to deliver on the ambitious vehicle lineup it has announced over the last couple of years. Tesla began shipping its Model Y crossover in early 2020. But customers are still waiting for the Tesla Semi, the Cybertruck pickup, and a new Roadster. Tesla is also supposed to release a refreshed, high-performance Model S Elon Musk has dubbed “Plaid.”
Even with this expanded product lineup, of course, Tesla will still have fewer car models than leading carmakers. So we we can expect Tesla to announce still more vehicles—perhaps even the $25,000 electric car Musk hinted at during his September battery day event—over the next year or two.