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I think the Feb raise by Tesla was probably done because they (Musk) thought that COVID-19 would hit the US and cause a lot problems, unlike most people at the

I think the Feb raise by Tesla was probably done because they (Musk) thought that COVID-19 would hit the US and cause a lot problems, unlike most people at the time. Diluting his holdings to put $2 billion in the bank for Tesla to get through the COVID problems seemed like a good idea. Now it looks like Tesla is not going to be hit as hard as he predicted and Musk would like to keep his percent ownership in Tesla as high as possible. He has said that when he needs personal cash he borrows against his stock holdings rather than selling them(at the tune of about $1 billion at the moment, iirc). Musk has also said that growth in his companies are mostly people constrained and not capital constrained. His companies can raise capital any time they decide it is a good idea.

matthewdgreen 6y ago
I guess I'm old enough to remember 2019, when Elon Musk raised the specter of the company running out of cash if they didn't engage in massive cost cutting [1,2]. Or even 2018, when Tesla's stock price crashed because Musk was joking about bankruptcy [3]. But leaving recent history aside: the fact of the matter is that Tesla is now valued at 136% the market capitalization of Toyota, an organization that currently ships about 50x more vehicles each year than Tesla does. The only possible way for Tesla to achieve earnings from car sales that justify this stock price* (on a reasonable time scale) is to build out their manufacturing capabilities at an unimaginable scale and pace. The amount of capital that this will require is vastly higher than anything Tesla has raised before. And since the period we're discussing is long enough that we can't predict global market conditions, Tesla may find themselves doing this remarkable build-out during a period where capital isn't easy or inexpensive to come by. * I'm assuming here that the market cap of Tesla reflects some realistic theory about future earnings, and isn't just a massive and unjustified bubble. Which it probably is. [1] https://www.theverge.com/2019/5/17/18629166/elon-musk-tesla-money-changes-cfo-employee-expenses https://www.theverge.com/2019/5/17/18629166/elon-musk-tesla-... [2] https://finance.yahoo.com/news/tesla-may-avert-bankruptcy-but-it-will-still-needs-1-billion-in-cash-201304219.html https://finance.yahoo.com/news/tesla-may-avert-bankruptcy-bu... [3] https://www.wsj.com/articles/tesla-shares-sink-as-musk-jokes-about-bankruptcy-1522682691 https://www.wsj.com/articles/tesla-shares-sink-as-musk-jokes...

matthewdgreen 6y ago

I guess I'm old enough to remember 2019, when Elon Musk raised the specter of the company running out of cash if they didn't engage in massive cost cutting [1,2]. Or even 2018, when Tesla's stock price crashed because Musk was joking about bankruptcy [3]. But leaving recent history aside: the fact of the matter is that Tesla is now valued at 136% the market capitalization of Toyota, an organization that currently ships about 50x more vehicles each year than Tesla does. The only possible way for Tesla to achieve earnings from car sales that justify this stock price* (on a reasonable time scale) is to build out their manufacturing capabilities at an unimaginable scale and pace. The amount of capital that this will require is vastly higher than anything Tesla has raised before. And since the period we're discussing is long enough that we can't predict global market conditions, Tesla may find themselves doing this remarkable build-out during a period where capital isn't easy or inexpensive to come by. * I'm assuming here that the market cap of Tesla reflects some realistic theory about future earnings, and isn't just a massive and unjustified bubble. Which it probably is. [1] https://www.theverge.com/2019/5/17/18629166/elon-musk-tesla-money-changes-cfo-employee-expenses https://www.theverge.com/2019/5/17/18629166/elon-musk-tesla-... [2] https://finance.yahoo.com/news/tesla-may-avert-bankruptcy-but-it-will-still-needs-1-billion-in-cash-201304219.html https://finance.yahoo.com/news/tesla-may-avert-bankruptcy-bu... [3] https://www.wsj.com/articles/tesla-shares-sink-as-musk-jokes-about-bankruptcy-1522682691 https://www.wsj.com/articles/tesla-shares-sink-as-musk-jokes...