Tesla's Secondary Offering Lifts All Boats -- Except Tesla's

Tesla Inc. (NASDAQ: TSLA) filed a prospectus Tuesday morning with the U.S. Securities and Exchange Commission (SEC) for a $5 billion secondary stock offering. The offering is an equity distribution agreement empowering 10 brokerages to sell Tesla shares whenever the banks choose to do so at market market prices.

Now is a very opportune moment for electric vehicle (EV) makers like Tesla to issue more shares. For the year to date, Tesla stock is up nearly 650%, while China-based competitors Nio Ltd. (NYSE: NIO), Xpeng Inc. (NYSE: XPEV) and Li Auto Inc. (NASDAQ: LI) have added 1,050%, 133% and 103%, respectively. Xpeng and Li Auto entered the public markets in July and August, respectively.

U.S. electric van maker Workhorse Group Inc. (NASDAQ: WKHS) has added about 573% to its share price this year as well. Only electric and hydrogen-electric truck maker Nikola Corp. (NASDAQ: NKLA) has seen its post-IPO stock get hammered, following a scorching short-seller report, to trade about 44% below its IPO price in April.

Nio raised $1.5 billion in an August follow-on offering, and Xpeng announced a secondary offering on Monday that could net the company up to $2.23 billion. Li Auto announced last Friday that it planned to sell 47 million American depositary shares (ADSs) this week at $29 per ADS to raise up to $1.6 billion.

The brokers that will act as sales agents for the Tesla offering are Goldman Sachs, Citigroup Global Markets, Barclays Capital, BNP Paribas Securities, BofA Securities, Credit Suisse Securities (USA), Deutsche Bank Securities, Morgan Stanley, SG Americas Securities and Wells Fargo Securities.

According to the prospectus, at Monday’s closing price of $641.75 per share for Tesla stock, the maximum number of shares outstanding could rise from 947.9 million at the end of September to 955.6 million.

Tesla plans to use the proceeds for the offering “to further strengthen our balance sheet, as well as for general corporate purposes.” If all shares are sold, Tesla’s cash hoard rises from $14.5 billion at the end of September to $19.5 billion and the company’s capitalization rises from $26.6 billion to $31.6 billion.

Ironically, perhaps, shares of the three China-based companies all traded higher Tuesday following Tesla’s announced secondary offering. Li Auto was up 7.5%, Nio was up 2.8% and Xpeng was up 1.5%. Nikola’s shares were up about 1.6%, and Workhorse traded down about 2.3%.

As for Tesla, shares traded down about 2.6%, at $624.80 in a 52-week range of $67.86 to $648.79. The price target on the stock is $375.66. Analysts continue to believe that not only is Tesla’s stock overvalued, it is way overvalued.

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