Tesla is wisely ringing the cash register amid a stunning stock rally. Speculators should take notice.
The car company said on Tuesday morning that it plans to sell up to $5 billion in stock just two weeks before it is set to join the S&P 500. It would be Tesla’s second such share issue since September.
The sale is a no-brainer for Tesla’s long-term health. After all, the stock has more than doubled since August, when the company announced a share split, and it has rallied more than 50% in the three weeks since its planned index inclusion was announced.
The timing is no longer one of immediate need for liquidity: Tesla ended the third quarter with $14.5 billion in cash on its books. Still, opportunities to turn bubble stock gains into real cash shouldn’t be squandered. With this coming infusion, Tesla has likely assured its long-term corporate survival barring some extreme scenario.
Tesla’s largest shareholder knows it, too: “Tesla stock price is too high imo,” Chief Executive Officer Elon Musk said in a May Twitter post. The stock has more than quadrupled since that proclamation. Stock prices for other electric vehicle manufacturers around the world also have surged in defiance of any fundamental analysis.