Tesla CEO Elon Musk has warned that the company’s shares are too expensive — but that’s not stopping the automaker from cashing in on its spectacular stock gains. He’s also made a big personal move.
Musk revealed Tuesday that he’d actually moved from California to Texas, telling the Wall Street Journal’s Matt Murray that he believed the state of California had started to take its innovators for granted.
The Journal notes that Texas doesn’t collect state income or capital gains tax for individuals, a potential boon for the second richest man in the world.
It’s the latest knock to a state that’s long been a hub for tech innovators but is starting to come under pressure. Hewlett Packard Enterprise said earlier this month that it was moving from California to Texas. Palantir, which has been a critic of Silicon Valley’s culture, recently moved its headquarters from Palo Alto to Denver, Colorado.
Tesla is still headquartered in California, as is SpaceX, Musk’s aerospace firm — though Musk has clashed with officials this year over a shutdown of Tesla’s Fremont factory during the coronavirus pandemic.
Stock move
Tesla has indicated that it will sell up to $5 billion in additional shares “from time to time” at market prices, the second such announcement made in a matter of months.
It makes sense. After all, Tesla’s shares have jumped 677% this year. They’ve rallied 363% since Musk tweeted in May that Tesla’s stock price was, in his opinion, “too high.”
Unlike in the past, Tesla isn’t in desperate need of cash. It had $14.5 billion on hand at the end of September, more than double what it had at the start of the year.
Instead, the stock sale appears to be an effort to turn paper gains into real money, given that the company’s valuation topped $600 billion for the first time this week. (Here’s your reminder that Tesla trades at almost 1,290 times trailing earnings. Toyota and Volkswagen, which produce far more vehicles, are trading at roughly 15 and 18 times earnings, respectively.)
“We believe this is the smart move at the right time for Musk & Co. after the parabolic rally in shares with the appetite strong among investors,” Wedbush Securities analyst Daniel Ives said in a note to clients.
Tesla has a number of big expenses coming up, after all. It’s in the process of building new plants in Germany and outside of Austin, Texas, and is working to bring a pickup truck and a semi-tractor to market for the first time, my CNN Business colleague Chris Isidore notes.
