Tesla made an about-turn on Thursday by announcing plans to raise $2 billion (Dh7.3bn) in a stock offering as the electric car maker taps into an astronomical jump in its share price in the past few months.
Chief executive Elon Musk has repeatedly assured investors the company will not need to raise more money. As recently as last month, Mr Musk said: "It doesn't make sense to raise money. Diluting the company to pay down debt doesn't sound like a wise move."
The company said it would offer 2.65 million shares, of which Mr Musk himself will buy up to $10 million in shares. Board member and Oracle co-founder Larry Ellison will purchase $1m Tesla shares.
Tesla's shares fell as much as 7 per cent in pre-market trading after tripling since October when the company posted a rare quarterly profit. Its market capitalisation is now worth more than the combined value of General Motors and Ford.
"Despite Musk's bravado about Tesla's finances, the company needs billions of dollars to finance growth," said Erik Gordon, a professor at the University of Michigan's Ross School of Business.
"He is smart to grab cash by selling stock at a sky-high price he might not see six months from now."
Tesla, whose outstanding debt was $13.42bn at the end of 2019, posted its second quarterly profit in a row in January and said it would comfortably make more than half a million cars this year.
The electric car maker said it plans to use the proceeds from the offering to strengthen its balance sheet and for general corporate purposes.
Tesla raised about $2.3bn in May to start production in China and spend on developing new models, including the high-volume Model Y SUV and a Semi commercial truck, whose launch has been delayed due to a lack of battery production capacity.
Since the last capital raise, Tesla has built a $2bn factory in Shanghai and unveiled the futuristic Cybertruck pick-up. The Shanghai factory started delivering cars last month.
Goldman Sachs and Morgan Stanley are the lead joint book-running managers. Barclays, BofA Securities, Citigroup, Credit Suisse, Deutsche Bank Securities and Wells Fargo are additional book-running managers.
The underwriters will get an option to buy up to $300m in additional shares.