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What is the potential impact of this move when it comes to shareholders? I understand that a lot of the recent upside was caused by a short squeeze, which is a

What is the potential impact of this move when it comes to shareholders? I understand that a lot of the recent upside was caused by a short squeeze, which is a product of limited share availability. Does this basically constitute a "cash out" for Tesla, and will this have a deflating effect on the stock?

hkmurakami 13y ago
I think that would partly depend on what price they offer the stock at to institutional investors.
NickM 13y ago
It's not clear whether it was actually a short squeeze, or just a normal value increase caused by the shorts covering their positions. Shorting a stock always has a negative impact on its price, so now that Tesla has a much lower short interest, it's expected that its price will be higher regardless of whether there was a true squeeze or not.
damoncali 13y ago
No. Tesla needs lots of money and will continue to need lots of money. They can get that from debt or equity (or maybe the government, but leave that aside). It is a signal that they believe that their stock is highly valued (or even over valued, but they would never say that) if they are raising equity - otherwise debt might be a more attractive offer. In the end, it's all a balancing act between taxes, cash flow, dilution, and market demand for securities. Any time you raise money, you dilute ownership (or lower cash flow in the case of debt), which has the direct effect of devaluing the stock. But you wouldn't do that unless you thought you could increase the value of the stock by investing that cash and increasing future cash flows. (Incidentally, this is why everyone is so pissed at Apple, who has way too much cash to invest properly - they should be giving it back to shareholders to invest themselves if they can't figure out what to do with it). The cynic in me says, "beware - this stock is overvalued and they're just taking advantage of that with this offering." The optimist says, "great then- they can raise money at a low cost and increase their chances of making it big". On this one, I'm siding with the cynic. This is highly speculative. Besides, do you want to be the one who is permitting them to raise money so attractively? (That's an open question - akin to paying a stupid valuation for a hot startup because it will not matter one day when it sells for 100x.) I'm reminded of the time when AOL bought Time Warner with it's insanely overvalued stock. Didn't turn out to well for Time Warner shareholders.

hkmurakami 13y ago

I think that would partly depend on what price they offer the stock at to institutional investors.

NickM 13y ago

It's not clear whether it was actually a short squeeze, or just a normal value increase caused by the shorts covering their positions. Shorting a stock always has a negative impact on its price, so now that Tesla has a much lower short interest, it's expected that its price will be higher regardless of whether there was a true squeeze or not.

damoncali 13y ago

No. Tesla needs lots of money and will continue to need lots of money. They can get that from debt or equity (or maybe the government, but leave that aside). It is a signal that they believe that their stock is highly valued (or even over valued, but they would never say that) if they are raising equity - otherwise debt might be a more attractive offer. In the end, it's all a balancing act between taxes, cash flow, dilution, and market demand for securities. Any time you raise money, you dilute ownership (or lower cash flow in the case of debt), which has the direct effect of devaluing the stock. But you wouldn't do that unless you thought you could increase the value of the stock by investing that cash and increasing future cash flows. (Incidentally, this is why everyone is so pissed at Apple, who has way too much cash to invest properly - they should be giving it back to shareholders to invest themselves if they can't figure out what to do with it). The cynic in me says, "beware - this stock is overvalued and they're just taking advantage of that with this offering." The optimist says, "great then- they can raise money at a low cost and increase their chances of making it big". On this one, I'm siding with the cynic. This is highly speculative. Besides, do you want to be the one who is permitting them to raise money so attractively? (That's an open question - akin to paying a stupid valuation for a hot startup because it will not matter one day when it sells for 100x.) I'm reminded of the time when AOL bought Time Warner with it's insanely overvalued stock. Didn't turn out to well for Time Warner shareholders.