Tesla's latest stock sale is a smart move on the heels of a 667% year-to-date rally, analyst says

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  • Tesla’s recently announced plan to sell up to $5 billion in shares is “the smart move at the right time” for CEO Elon Musk and the rest of the company, Wedbush analyst Dan Ives said Tuesday.
  • The automaker revealed Tuesday morning it will offer shares “from time to time” with 10 banks serving as sales agents.
  • The announcement comes as Tesla stock sits 667% higher year-to-date. The massive rally allows Tesla to “build up its treasure chest and capital-expenditure capabilities” while shares sit near record highs, Ives said.
  • Tesla dipped as much as 1.7% in early trading on the news.
  • Watch Tesla trade live here.

Tesla’s third stock sale of the year is a smart way for the automaker to take advantage of its meteoric rally through 2020, Wedbush analyst Dan Ives said Tuesday.

The electric vehicle manufacturer announced Tuesday morning it might raise up to $5 billion through new share sales. Tesla inked a deal with 10 banks, including Bank of America, Goldman Sachs, and Morgan Stanley, that will serve as sales agents or buy shares themselves when any portion of the $5 billion in stock becomes available. The shares will be offered “from time to time,” and Tesla will work with the banks to determine how many shares are sold and at what price.  

The deal is “the smart move at the right time” for CEO Elon Musk and the rest of the company’s leadership, Ives said in a note to clients. Tesla was up 667% year-to-date by Monday’s close, riding a wave of fresh analyst bullishness, strong earnings, and retail-investor interest. 

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The planned sales allow the company to “build up its treasure chest and capital-expenditure capabilities down the road,” Ives said. Wedbush rates Tesla “neutral” with a price target of $560 per share.

Tesla fell as much as 1.7% in early Tuesday trading. The dip only slightly dents the 7% rally that pulled shares to a record-high close of $641.76 on Monday.

The new stock-sale plans follow a $2 billion sale in February and a $5 billion issuance in September. The offerings have supported Tesla’s goal to double capital expenditures over the next two years, mostly through new factories and equipment.

The Tuesday announcement also comes one week after famous investor Michael Burry called on Musk to sell more shares at their “current ridiculous price” in a tweet. The hedge fund manager – made famous by his portrayal in the novel “The Big Short” and its film adaptation – noted that, though he’s short Tesla, the CEO should issue 25% to 50% of his shares to convert the stock’s massive 2020 rally into usable cash for the automaker.

“That’s not dilution,” Burry added. “You’d be cementing permanence and untold optionality.”

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