February 13, 2020 / 5:45 PM / 9 days ago

BUZZ-Whiplash: Tesla announces equity raise, recall, and stock rallies

(Updates with details on stock reversal, analyst comment)

** Shares of Tesla Inc seemingly defying gravity on Thurs, rallying ~6% after electric car maker said it plans to sell $2 bln of shares and announced a recall of SUVs

** The stock fell over 4% in early trade, as might be expected after a co announces it plans to dilute shareholders, but then climbed into positive territory

** TSLA said before the bell it would offer 2.65 mln shares, of which CEO Elon Musk will buy up to $10 mln worth, while board member and Oracle co-founder Larry Ellison will purchase up to $1 mln ** Musk has repeatedly said TSLA would not need to raise more money, but TSLA’s recent rally sparked speculation he might take advantage of the high stock price ** TSLA has tripled since Oct, when co posted a rare quarterly profit. Ramp-up of Shanghai factory has also fueled gains

** “We think the offering was prudent given current share prices (albeit somewhat contrary to management’s recent commentary), and should help fund future investment,” Baird analyst Ben Kallo wrote in a client note

** Kallo, who has “neutral” rating on TLSA, said share offering would help fund future capex and could give analysts with “sell” ratings pretext to upgrade following the recent surge

** Most Wall St analysts have been on the wrong side of TSLA’s recent rally. Fourteen analysts recommend selling TLSA, while 11 analysts have neutral ratings and nine recommend buying, per Refinitiv ** Late on Weds, TSLA recalled 15,000 Model X SUVs because of a potential issue that can lead to a loss of power steering assist that could increase the risk of a crash

** Goldman Sachs & Co and Morgan Stanley acting as lead joint book-runners for the equity raise (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru, and Noel Randewich in New York)

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