Tesla has announced it will sell up to $5 billion in stock, Wall Street Journal reported. After Elon Musk’s company stocks rose by over 500%, sales proved Tesla has been more resilient amid COVID-19 than experts forecasted.
According to experts, it is clear that Tesla will use the income to improve its balance sheet. Also, Tesla has two projects on hold: a new factory in Germany and the expansion of its Nevada’s Gigafactory battery plant that both need funds.
One more piece of good news: Tesla’s stock is doing so well that it will be added to the S & P 500 index by the end of the year.
Tesla, 2020’s Unexpected Success
2019 was a bitter year for Tesla: not only it decreased its prices in China, but it also went through a rough patch in terms of PR since its founder Elon Musk, appeared on Web-TV and radio smoking marijuana.
However, this year was much more settling for Musk, with the birth of his first child with Canadian singer Grimes back in April.According to Motley Fool, Tesla’s “had $8.6 billion in cash on hand, versus about $7.8 billion in long-term debt.”
Tesla Shares surged on Wednesday
This week, Tesla shares were up 6% on the market and rose as much as 10.5%. This gain was followed after the sharpest drop of Tesla shares since the beginning of the year on Tuesday.
Tesla shares close lower by 21%, its worst one day drop ever https://t.co/GwO6kBW57J pic.twitter.com/Lpgxm1Qsvs
— CNBC Now (@CNBCnow) September 8, 2020
To many experts, Tesla has been “overselling” its shares. According to analysts, Tesla shares will keep on going up, although there might be a few “bumps” on the road.
At the moment, shares have gone from $274.80 on August 11th to $366.21 on Wednesday 9th, September.
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Will this overvaluation hinder Tesla’s business in the long term?
No later than yesterday, the press was confirming that Tesla was eventually left out from the 500 S&P Index, while S&P integrated Etsy, Catalente and Teradyne.
Tesla not added to S&P 500 in latest index changes https://t.co/wLcxJH5vzV
— Michael C. Khouw (@Michael_Khouw) September 4, 2020
According to DatataTrek cofounder Nicholas Colas, S&P Dow Jones Indices index committee’s decision was a “brave one”, he shared with Business Insider, confirming specialists’ doubts amid Tesla’s ability to retain its shares this high.
However, other analysts argue that results are here: Tesla shares have quintupled in 2020, “pushing its market capitalization to $380 billion as of Friday’s closing bell”, concludes MarketWatch.
One thing is sure: Tesla is a hot topic that keeps the markets moving. The above content is considered to be market commentary information and shall not be perceived as independent investment research or investment advice.