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You've contradicted yourself in the two quotes below. "Tesla is basically taking on a loan in form of a convertible notes." "So at the end of a day: Tesla is

You've contradicted yourself in the two quotes below. "Tesla is basically taking on a loan in form of a convertible notes." "So at the end of a day: Tesla is raising capital without diluting their shareholders and reducing their share values" Convertible debt is in fact dilutive. It's even specifically accounted for when calculating Diluted Earnings per Share : http://www.investopedia.com/terms/d/dilutedeps.asp http://www.investopedia.com/terms/d/dilutedeps.asp

salimmadjd 10y ago
But you're not flooding the market with $750M new common stock of TSLA in the market. If TSLA price crashes it could impact consumer confidence in buying the T3 which Tesla is banking on. If TSLA drops and T3 are delayed, many consumers might panic and not oder their car creating a vicious circle.
- jonknee 10y ago
  ... They are also issuing new shares: > Concurrently with this offering of notes, we are offering 968,993 shares of our common stock (or up to 1,114,341 shares of our common stock if the underwriters of that offering exercise their option to purchase additional shares in full), in an underwritten offering pursuant to a separate prospectus supplement. The closing of this offering of notes is not contingent upon the closing of the concurrent offering of common stock, and the closing of the concurrent offering of common stock is not contingent upon the closing of this offering.
arzt 10y ago
Sort of, but not really...the FASB has said you can treat the underlying shares as non-dilutive if the stock price isn't above the conversion price (this is called "net share settlement"). So basically, while outstanding, the debt acts like debt for accounting purposes until the stock price is above the conversion price. When it goes above the conversion price, the you treat those incremental shares as dilutive. Additionally TSLA is putting what's called a bond hedge (or call spread) on top of this, which limits dilution over and above an even higher stock price. Pretty sweet deal if your stock price doesn't go up and you only have to pay minimal interest. Here's an example that lays out a similar structure and accounting treatment: https://www.sec.gov/Archives/edgar/data/1084961/000119312513055339/d486089dex992.htm https://www.sec.gov/Archives/edgar/data/1084961/000119312513...
- nemanja-mit 10y ago
  looks like you've done time on a coverts desk ;)
  - arzt 10y ago
    In another life... :)
- dilemma 10y ago
  >Pretty sweet deal if your stock price doesn't go up and you only have to pay minimal interest. So Tesla is shorting TSLA?
  - arzt 10y ago
    Lol, effectively. A convert is basically a forward stock sale, so if you're TSLA you're basically saying "I get a pretty good cost of capital if my stock stays where it is, but if it goes up a lot, my company is probably in better shape than it was before I raised capital, so I'm more or less happy either way."

salimmadjd 10y ago

But you're not flooding the market with $750M new common stock of TSLA in the market. If TSLA price crashes it could impact consumer confidence in buying the T3 which Tesla is banking on. If TSLA drops and T3 are delayed, many consumers might panic and not oder their car creating a vicious circle.

jonknee 10y ago
... They are also issuing new shares: > Concurrently with this offering of notes, we are offering 968,993 shares of our common stock (or up to 1,114,341 shares of our common stock if the underwriters of that offering exercise their option to purchase additional shares in full), in an underwritten offering pursuant to a separate prospectus supplement. The closing of this offering of notes is not contingent upon the closing of the concurrent offering of common stock, and the closing of the concurrent offering of common stock is not contingent upon the closing of this offering.

arzt 10y ago

Sort of, but not really...the FASB has said you can treat the underlying shares as non-dilutive if the stock price isn't above the conversion price (this is called "net share settlement"). So basically, while outstanding, the debt acts like debt for accounting purposes until the stock price is above the conversion price. When it goes above the conversion price, the you treat those incremental shares as dilutive. Additionally TSLA is putting what's called a bond hedge (or call spread) on top of this, which limits dilution over and above an even higher stock price. Pretty sweet deal if your stock price doesn't go up and you only have to pay minimal interest. Here's an example that lays out a similar structure and accounting treatment: https://www.sec.gov/Archives/edgar/data/1084961/000119312513055339/d486089dex992.htm https://www.sec.gov/Archives/edgar/data/1084961/000119312513...

nemanja-mit 10y ago
looks like you've done time on a coverts desk ;)
- arzt 10y ago
  In another life... :)
dilemma 10y ago
>Pretty sweet deal if your stock price doesn't go up and you only have to pay minimal interest. So Tesla is shorting TSLA?
- arzt 10y ago
  Lol, effectively. A convert is basically a forward stock sale, so if you're TSLA you're basically saying "I get a pretty good cost of capital if my stock stays where it is, but if it goes up a lot, my company is probably in better shape than it was before I raised capital, so I'm more or less happy either way."