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I don't think you'll find many people claiming that Tesla is on the brink of bankruptcy. You'll find plenty of people saying that the stock is overvalued and th
by brianpgordon 8y ago
I don't think you'll find many people claiming that Tesla is on the brink of bankruptcy. You'll find plenty of people saying that the stock is overvalued and they bet it will go down (possibly to zero over a longer time horizon).
The point is that if Tesla wants to remain solvent then it will be forced to offer an attractive chunk of equity as part of a raise, and that will be a blow to the share price. They're out of assets to put up as security and their unsecured debt is already yielding north of 8%. They'll have to offer equity.
- dmode 8y agoWho cares if they offer equity ? Would anybody remember that 5 years from now ? I have no recollection of when they raised equity in the past.
- brianpgordon 8y agoWith its unsecured 2025 bonds trading at 83 cents on the dollar and an SEC investigation ongoing, they might have to accept a lot of equity dilution on a raise big enough to keep them operating. 10% dilution in exchange for operating cash that will be promptly burned would add 10% more headwind on their earnings per share. If the market had at least to some extent believed Musk that another raise was unnecessary then that would negatively affect the share price.