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Tesla Announces $2B Public Offering to Accelerate Model 3 Ramp Up
- vessenes 10y agoThis is not a surprise; there's an old saw that I think I first read in a Buffet annual report. It says that financing tends to alternate forms for companies in terms of what makes sense: debt -> equity -> debt -> equity. Equity offering seems likely to be much cheaper than debt right now; Tesla has great mindshare among consumers, and lots of doubters on the professional investor side.
- verganileonardo 10y agoThat happens because the company is trying to adjust the capital structure to maintain a 'constant' leverage ratio. Too much leverage? Sell shares! Not enough leverage? Sell debt!
- mdorazio 10y agoAlso, Tesla's valuation is still sky-high in comparison to comparable companies (automotive or tech), so converting some of their shares into cash now makes a lot of sense.
- crabasa 10y agoecho "Tesla to offer $1.4 billion shares, remaining to be sold by Elon Musk. Musk is exercising options to buy 5.5m shares and will boost overall holdings on net basis. Developing... " | wc 1 30 176 News articles and tweets are converging at an alarming rate.
- Diamons 10y agoTwitter's been around for 10 years, and Twitter is mostly a fad. I wouldn't call it alarming.
- kgwgk 10y agoNewswires have been around for 100 years... Edit: to be clear, my point was that "twitter-like" news alerts are not new; not that Twitter is some kind of successor to newswires.
- toomuchtodo 10y agoAnd they'll still be around in 100 years. Twitter? Not so much.
- nathancahill 10y agoEh, that's just fintech. They push stuff like that out as fast as possible, then update it continuously as the story develops. The difference in a few millisecond of publishing is directly correlated to profit.
- agumonkey 10y agohttp://imgur.com/MRnd81J http://imgur.com/MRnd81J
- jboydyhacker 10y agoThe big surprise here isn't that Tesla was doing an offering - it was Goldman did a huge research note 24 hours before the offering while actually participating in said offering. Super bad form and just goes to show the community- don't trust investment bankers. Such bad form.
- nathancahill 10y agoI feel for the grunts that worked through the night writing that note. They'll probably get a nice bonus though.
- asbromberg 10y agoIsn't this exactly what's supposed to happen at big banks? I thought we wanted the equity research department to be separate and not conflicted with capital markets?
- xadhominemx 10y agoThe equity research department is firewalled off from the deal teams doing the offering. It would be unethical if the people who published the research note even knew anything about the offering.
- kbenson 10y ago> It would be unethical if the people who published the research note even knew anything about the offering. Whether something is unethical is not evidence for or against something happening, it just informs your opinion on whether it happened. Given Goldman's past behavior, I wouldn't let it inform my opinion too much in the direction that they worked in an ethical manner.
- TeMPOraL 10y agoSadly, humans are very good at rationalizing their unethical. The rule of thumb seems to be that whenever there's something unethical but profitable (in terms of money or power), absent any non-moral kind of stopping force (like risk of getting caught and jailed, or social ostracism), a lot of people will be doing that unethical thing. You don't have to go further than to your local grocery store to notice that.
- jernfrost 10y agoWhy do people keep spouting this nonsense that Tesla is losing money on EVERY car? They make money on every car otherwise they wouldn't be selling any cars. The lose money due to their high R&D.
- chrisper 10y agoDo they not lose money per car if you factor in the R&D?
- mikeash 10y agoRevenue minus costs might be negative, but phrasing it as "lose money per car" is highly misleading. The pertinent question is, if they sell more cars, what happens to their finances? Most people interpret "lose money per car" to mean that additional sales results in additional financial losses. If each car is profitable but you haven't yet made back your R&D then each additional sale improves your financial picture and brings you closer to profitability.
- blakeyrat 10y agoI wonder if they report the same way when, say, Boeing introduces a new airliner. I mean by that logic, each Dreamliner sold "lost" millions...
- basseq 10y ago"Unit Profit" vs. "Business Profit". Yes, if you factor in the R&D they "lost money per car", but at scale, they would make money per car. If your unit cost is $50 and your unit revenue is $100, your unit profit is $50. If you sell 100,000 units, your business revenue is is $10M. If you spend $10M on R&D (and other overhead), your business costs are $15M and your business profit is -$5M. BUT, if you sell 1M units, your revenue is $100M, your costs are $60M ($50M unit + $10M R&D), and your profit is $40M. That's the power of scale. (Compare this to a business with a negative unit profit: it won't scale no matter what you do.)
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- marvin 10y agoFrom the press release, it appears that the capital raise is "only" $1.4 billion -- the remainder is Elon Musk selling shares to cover his tax liability for simultaneously exercising options from 2009. Hopefully 1.4 billion is enough.
- dsugarman 10y agoI don't think it is, I am guessing they are going to go back to the well when the stock price is higher, but I don't really like that strategy.
- 11thEarlOfMar 10y agoIt's neither here nor there, but I feel like Bugs Bunny in "High Diving Hare", and Musk just raised the platform another 50 feet: https://youtu.be/6eZaVdFbo6A?t=145 https://youtu.be/6eZaVdFbo6A?t=145
- Animats 10y agoWell, $1.4 billion for Tesla, $0.6 billion for Musk personally, and an option for Goldman Sachs to get $0.21 billion.[1] Tesla stock is down in after-hours trading, but that doesn't mean much. If the stock is down significantly at the close tomorrow, the market didn't like this. It's a legit offering. The company intends to build a big factory and make stuff. Real capital assets will be bought with that money. It's not to sell stuff at a loss to gain market share in hopes of raising prices later. (Looking at you, Uber.) Tesla just hired Audi's head of manufacturing, Peter Hochholdinger. About a week ago, the previous two top people in manufacturing quit, right after Musk announced he wanted the production line running two years sooner. Maybe Hochholdinger can do it. [1] https://www.sec.gov/Archives/edgar/data/1318605/000119312516594471/d185970d424b5.htm https://www.sec.gov/Archives/edgar/data/1318605/000119312516...
- cloudjacker 10y agoGoldman Sachs and Elon Musk are likely the largest buyers of this offering. So the stock doesn't have to go down much from this dilution as they are absorbing it.
- jgalt212 10y agoIt's pretty obvious at this point that Tesla's number one product is their stock. Which makes it no different from a number of other high fliers. At first they were an innovative car company. Then the stock price shot well above the level sustainable by an electric car company. Elon realized this, and then builds the Giga factory. We're not just a car company, we're a power company! Now they are raising more equity off of an inflated stock price. I'd stay away from this one. Not a total hater, Tesla cars are great, but one of these day's Elon's moon shots and obsession with the stock price will catch up with him (he'll still be rich) and his investors (they may be significantly less rich).
- mjbellantoni 10y agoAnyone have thoughts as to why they're selling stock as opposed to issuing bonds?
- mywittyname 10y agoSounds like they would need to issue a ton of stock anyway, because Musk is exercising like $600M in options.
- slantaclaus 10y agoTesla has a really great business. They're not just cars, they're batteries. Their home battery for storing solar energy is a huge deal at least in terms of future cash flows. Also, they're a white label supplier of batteries to companies like Toyota and Mercedes. Anyway--new long term TSLA shareholder here. Bought in at $205.
- syngrog66 10y agoWhen you have 375k $1000 preorder deposits its probably an ideal time to raise investment.