"[W]e're spending money ... efficiently and we're not artificially limiting our progress. And then, despite all that, we are still generating positive cash," CEO Elon Musk said in Tesla's (NASDAQ:TSLA) fourth-quarter earnings call on Jan. 29 when asked whether the company was considering raising capital following the stock's big run-up in the months leading up to the quarterly update. "So in light of that, it doesn't make sense to raise money because we expect to generate cash despite this growth level."

But the plan has apparently changed. In a filing with the Securities and Exchange Commission (SEC) on Thursday, Tesla said it plans to generate more than $2 billion through an equity raise.

Elon Musk at the groundbreaking event for Tesla's Gigafactory 3 in China

Tesla CEO Elon Musk. Image source: Tesla.

The offering

Specifically, Tesla said it will raise capital through equity by issuing 2.65 million shares, or up to about 3.05 million if underwriters exercise options to purchase additional shares. Based on the stock's $767.29 price at the time of the filing, the equity raise would yield Tesla between $2.01 billion and $2.31 billion.

"We intend to use the net proceeds from this offering to further strengthen our balance sheet, as well as for general corporate purposes," the company said in the filing.

Notably, Musk said he is participating in the equity raise by purchasing as much as $10 million worth of stock. Billionaire and Tesla board member Larry Ellison, who bought 3 million shares of the automaker in 2018 for about $1 billion (a stake that's now worth more than $2 billion), has indicated preliminary interest in purchasing up to $1 million worth of Tesla stock.

Why raise cash now?

Tesla's boilerplate explanation for raising more cash (to strengthen its balance sheet and fortify spending for general corporate purposes) likely doesn't tell the whole story regarding the automaker's move to raise capital just a few weeks after insisting its business had become self-funding.

Wrapping up 2019 with free cash flow of more than $1 billion and cash of $6.3 billion, there wasn't an immediate need for Tesla to raise capital. But here's the kicker: Shares are up 30% since it reported earnings in late January. Such a steep rise in the company's stock price may have ultimately persuaded management to reconsider its stance on capital raises. Tesla can now raise more capital with less dilution than it could just a few weeks ago.

Furthermore, the electric car maker has some capital-intensive product plans in its pipeline. More cash helps mitigate the risk of a cash crunch as Tesla gets these initiatives off the ground. In China, it is ramping up production of Model 3 vehicles, made specifically for the China market, at its new factory. The company plans to start delivering its new crossover SUV next month. And later this year, Tesla aims to start limited production of its Tesla Semi. Finally, the company's Roadster and Cybertruck are currently in development.

Investors should look for Tesla to truly become self-funding -- to the point that the automaker can fully fund its growth plans with cash generated from regular operations. If Tesla needs to continually raise capital through debt or equity raises, this could make it difficult for the company to grow per-share intrinsic value rapidly enough in the coming years to live up to the stock's current valuation.