Tesla’s market cap topped $611 billion on Tuesday after the stock rose 1.3% to $649.88 a share.
Justin Sullivan/Getty ImagesWhat’s $5 billion among friends? Not much if you’re Elon Musk.
Speaking at The Wall Street Journal CEO Council Summit on Tuesday, the CEO of Tesla (ticker: TSLA) sounded nonchalant about a planned $5 billion equity issuance, discussing it almost as an afterthought.
“We were debating, should we raise money, should we not,” Musk said. “In the end, we thought we can retire debt and increase the security of the company…probably a good thing. And for less than 1% dilution, it probably makes sense. It could have gone either way.”
Musk said the money would be used “to have a bit more of a war chest.” He then opined, “What is money? It’s an entry in a database.”
Musk can afford to sound casual about raising $5 billion. Tesla’s market cap topped $611 billion on Tuesday after the stock rose 1.3% to $649.88 a share. The electric-car maker is making it into the S&P 500, after posting five consecutive quarters of profit.
Shares have surged 677% this year. And for good reason: The company is on track to deliver about 500,000 electric vehicles in 2020, with estimates for 757,000 deliveries next year. A new gigafactory is under construction near Berlin, following the opening of a factory in China. Analysts expect revenue to hit $30.6 billion this year and $45 billion in 2021.
Musk also confirmed that he has moved from California to Texas, saying he is spending more time in the state for a couple of reasons. Tesla is building a factory near Austin to produce electric trucks. And Musk’s other company, SpaceX, has been developing a new Starship spacecraft in the state. A test flight from Boca Chica, Texas, was scheduled for Tuesday but it hadn’t launched as of 5 p.m. Eastern time.
Musk had some harsh words for Tesla’s home state of California and the Bay Area. “California is great,” he said, adding that Tesla is the last major manufacturer in the auto and aerospace industries in the state. “My companies are the last two left,” he said. But he compared the state to a sports team that has gotten fat and happy from successive championships.
“If a team has been winning too long they get complacent…and don’t win championships anymore,” he said. “California has been winning for a long time and is taking it for granted.”
Silicon Valley has “too much influence on the rest of the world,” he said, noting that it is home of the social-media giants, which he said shouldn’t shut down public dialogue or debate over controversial issues.
Musk has another good reason for moving to Texas: taxes. His 170 million shares of Tesla are worth $110 billion. And he could pay billions of dollars if he were to be taxed at California rates instead of Texas, which doesn’t have a state income tax. Indeed, the top 1% of California taxpayers pay an average 12.4% in state and local taxes, according to the Institute on Taxation and Economic Policy, while the top 1% of Texas taxpayers pay just 3.1% in local sales and property taxes.
Musk also bemoaned what he called the MBAization of corporate America, saying managers are spending too much time with spreadsheets and board meetings, rather than working to improve their products.
“I earnestly would recommend spending less time in meeting rooms…and more time on the factory floor and with customers,” he said. “Step back and say, ‘is your product as awesome as it could be?’ Probably it’s not.”
Corrections & Amplifications: Elon Musk owns 170 million shares of Tesla. An earlier version of this story said 170,000.
Write to Daren Fonda at daren.fonda@barrons.com
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Musk Shrugs at Tesla’s $5 Billion Stock Issuance. ‘It’s an Entry in a Database.’ - Barron's
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