Tesla is Raising $2 Billion in Funding Two Days After Elon Musk Said It Didn't Need To

Musk will buy up to $10 million of the new shares, with board member Larry Ellison buying $1 million.
Tesla is Raising $2 Billion in Funding Two Days After Elon Musk Said It Didn't Need To
Image credit: Alex Wong/Getty Images via BI
Tesla and SpaceX CEO Elon Musk speaks at an event in 2014.

Grow Your Business, Not Your Inbox

Stay informed and join our daily newsletter now!
3 min read
This story originally appeared on Business Insider

 said on Thursday it plans to raise $2 billion by selling shares through a public offering, just two weeks after Elon Musk said the company wasn't looking to raise fresh funding. 

Musk will buy up to $10 million in shares from the new offering, while and Oracle cofounder will purchase $1 million worth Tesla shares. The underwriters will get an option to buy up to $300 million in additional shares.

On the company's fourth-quarter earnings call on January 29, Musk said it "doesn't make sense" to raise capital given Tesla's current state. 

"We're actually spending money as quickly as we can spend it sensibly," he said in response to an investor question.

"So if there's any sensible way to spend money, we are spending it. There is no artificial holdback on expenditures. Anything that I see that is -- looks like it's got good value for money, the answer is yes, immediately. So we're spending money, I think, efficiently and we're not artificially limiting our progress. And then despite all that, we are still generating positive cash. So in light of that, it doesn't make sense to raise money because we expect to generate cash despite this growth level." (Emphasis ours.) 

The electric-car maker said it plans to use the proceeds from the offering to strengthen its balance sheet and for general corporate purposes.

and are the lead joint book-running managers. Barclays, BofA Securities, , Credit Suisse, Deutsche Bank Securities and Securities are the additional book-running managers. Societe Generale is the acting co-manager.

Shares of the company fell about 4% in early trading following the offering's announcement. Tesla on Thursday morning also filed its annual report for 2019. 

Despite the stock slump, some analysts praised the move to raise money. 

"This will be a bit of a shock to some given the company talked about no need to raise capital on its recent conference call, although the bulls (which we agree with) will say this essentially rips the bandaid off and takes the doomsday cash crunch scenario some predicted down the road now off the table," Daniel Ives, an analyst at Wedbush, said in a note to clients.

"In our opinion the size of this offering is larger than many had anticipated, but we believe it's a smart move by Musk and the Board to take advantage of being back in a position of strength with the Street and focus on raising capital at a time when EV demand is just starting to inflect with China the main fuel in the growth engine."

More from Entrepreneur

We created the SYOB course to help you get started on your entrepreneurial journey. You can now sign up for just $99, plus receive a 7-day free trial. Just use promo code SYOB99 to claim your offer.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Entrepreneur Store scours the web for the newest software, gadgets & web services. Explore our giveaways, bundles, "Pay What You Want" deals & more.

Latest on Entrepreneur