It looks like Tesla (TSLA) is on the brink of a major collapse—again. Amid a slowdown in overall electric vehicle demand and its disappointing first-quarter financial results, Tesla shares have tumbled more than 30 percent since the beginning of 2019, hitting a two-year low on Wednesday at $234 per share.
As usual, CEO Elon Musk has to do something to restore investor confidence. But instead of turning to Twitter like he habitually done in the past, this time Musk opted for something much more real and serious: putting in his own money as a new investment.
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In an SEC filing Thursday morning, Tesla said Musk plans to buy $10 million worth of Tesla stock, or 41,896 shares, as part of a new $2 billion funding round Tesla is about to raise.
The move came just a week after Musk told Tesla shareholders that Tesla was waiting for the right timing to raise fresh capital.
“I don’t think raising capital should be a substitute for making the company operate more effectively,” he said at the company’s first-quarter earnings call. “I do think there is some merit to raising capital, but this is sort of probably about the right timing.”
Musk’s big investing plan did seem to stop the company stock slump at least a little bit. Tesla shares popped five percent Thursday morning on the fundraising news, before falling slightly as trading resumed.
But analysts see Musk’s personal investment as a reliable signal for buying Tesla stock. Following his last five purchases, Tesla shares, on average, rose 41 percent in the next three months, according to equity researcher InsiderScore.
And Tesla’s need for new capital infusion is definitely real. “There was growing fears that this company was going to need incremental cash going to the second half of the year. For the first time, they listened to investors and the math doesn’t lie in terms of what they needed to do,” Dan Ives, managing director of equity research at Wedbush Securities, told CNBC. “Now there’s a relief because the liquidity issue and the finance concern could be put to rest in the near term.”
