Tesla to raise up to $5B in share offering, its second in three months

https://www.cnbc.com/2020/12/08/tesla-to-raise-up-to-5-billion-in-share-offering.html

by miked85 • 6 years ago

49 61 6 years ago

RivieraKid• 6 years ago

Of course. It's basically free money at this stock price.

At their valuation this would be the perfect time to raise more capital. You don't dilute the shares much. At 600 billion dollar valuation you are assuming rates will be 0 for a while and that tesla will be more profitable than any existing car company by a bit.

grey-area4• 6 years ago

At that valuation of 600B the assumption is that they’ll be more profitable than all the other leading car companies combined!

Their current valuation is not justified by even the most optimistic projections IMO, though their holistic view of energy should help (they can become a lifestyle brand, not just a car company), but it’ll take a decade to grow into this valuation. Even Musk thought it was overvalued and said so twice this year when it was worth a lot less.

As you say that makes this the perfect time to raise (again).

bryanlarsen5• 6 years ago

Most of the other large car companies have debt loads over $100 billion. This means two things:

- they have significant amounts of capitalization that don't show up in their market capitalization. "Enterprise Value" (which includes debt) is a more accurate representation of their size.

- Their stock prices reflect a significant risk of bankruptcy. If Ford doesn't go bankrupt, it's worth a lot more than $9. If it does, it's worth $0. This analyst rates that probability at 42%: https://www.macroaxis.com/invest/ratio/F/Probability-Of-Bank...

onetimemanytime3• 6 years ago

The thinking, right or wrong, goes that Tesla will do more than cars. Like batteries for consumers, utilities, homes, states... IMO it's overpriced but what the hell do I know. I thought Google was overpriced in 2010

xiphias24• 6 years ago

Whether these are overpriced depends on how low rates you can get. Would you say Tesla is a bad trade if you would get a debt with 2% yearly rate that you have to give back in 30 years?

anonymouse0082• 6 years ago

Does anyone have any insight as to why this is offered at the market? Avoiding fees? Fiduciary Responsibilities?

This is the second at the market offering for Tesla, and I know Elon understands the stock market better than most, so there must be a long term reason.

neural_thing• 6 years ago

Because it's an insanely overvalued stock with questionable accounting and a retail cult following. No bank wants to pitch it to clients with whom they'll work again, but dumping it on the market makes sense, retail will gobble it up.

anonymouse0082• 6 years ago

Yeah, that’s kinda what it feels like... I’m surprised the sp wants this much volatility. Hell I’m in though - last 15mins of MWF have been a lot of fun this year.

Hjfrf• 6 years ago

Elon knows exactly why -

https://mobile.twitter.com/elonmusk/status/12562398152567971...

onetimemanytime3• 6 years ago

Smart, super smart. I'd pay all the debt and have 2 year runaway for next to nothing in shares (relatively speaking)

beefield• 6 years ago

I am not sure if that move is especially smart. More like not being a complete idiot by not taking the almost free money people are trying to shove on your bank account.

H8crilA• 6 years ago

Amateurs. With this level of overvaluation you raise 25%-50% of market cap (could be via acquisitions), and then you actually have a shot at making self driving cars and other moonshots.

onetimemanytime3• 6 years ago

No,because the stock will crash (faster). Loses for many, many years. Also with all that cash a firm might launch a takeover--using that cash, if Tesla is ever weakened enough

bradleyjg• 6 years ago

They have robust anti-takeover provisions like most companies since Delaware turned so hostile to shareholders.

hasuej• 6 years ago

they already are making self driving cars

xiphias24• 6 years ago

They would do it if they could, but they have to raise money without decreasing shareholder confidence. It seems like diluting by 1% every quarter is fine.

tanto2• 6 years ago

It’s not like 600B evaluation is equal to being able to sell for 600B. Let me explain.

If you got a company named T with a total of 100 shares. Now they want to raise money and someone is willing to pay $10 for a share. You get a market cap of $1000. They create the extra share and someone is still willing to pay $10 a share. Magically they are worth $1010.

Now T is selling the share for $10 and the next guy willing to buy only wants to pay $9. Magically the market cap drops to $909.

Right now many Tesla share owners believe they will get rich by holding. Someday all of them might realize at the same time everybody is holding and decide to sell. If that day is tomorrow it will not be 600B actual dollars changing ownership.

If Tesla would raise 25% market cap they would destroy the stock. I guess it might take at least a month or more for the market to absorb 1% new shares.

Right now we have a market where a lot of people sold and the same or new investors freshly bought again and are optimistic. We got many people buying and not so much selling. Market cap is in a way a to simplistic metric.

justapassenger• 6 years ago

It works like that for companies with normal, fundamentals based valuation. Tesla stock is hype driven meme stock for last few years, and it’s very plausible that even a huge raise would result in stock price going up. It’s a huge party like it’s 1920s again.

tuyguntn4• 6 years ago

with this valuation, I would instead sell half of company and acquire GM and Ford for that money, then it would definitely be 600B company, as a bonus I might as well add some smaller companies just in case like Hyliion

UPD: will acquire Boeing as well

DarmokJalad17014• 6 years ago

acquire GM and Ford

Why take on all the baggage?

tuyguntn4• 6 years ago

because they really produce lots of cars every year, they do have facilities to produce as many cars as you want and their respective revenues are 130B and 150B, +Boeing 75B.

bryanlarsen5• 6 years ago

Musk has stated that he will entertain offers to merge, but won't be doing any hostile takeovers.

https://electrek.co/2020/12/01/elon-musk-tesla-tsla-merging-...

I seriously doubt that he would be interested in taking on GM's or Ford's hundreds of billions in debt, though.

SilasX2• 6 years ago

Wow, really? Wouldn't a merger dilute his ability to control the company and make ambitious bets? I can't image Musk going for something that lets his BoD fill with old-school auto industry types.

Or does "merger" include "buyouts"?

mbesto• 6 years ago

I would instead sell half of company and acquire GM and Ford for that money

Anti-trust?

spikels• 6 years ago

Very smart. Tesla joins the S&P500 in 13 days. Investors tied to this index are short at least $100 billion in stock. A $5 billion offering will have little impact on existing shareholders but take advantage of the high stock price.

JohnJamesRambo• 6 years ago

I don't understand anything about Tesla valuation anymore. It's like watching Theranos and Enron (Tesla is currently 10x Enron market cap at peak) happen at an even larger scale from memes and hope and hero worship and fuzzy math. It's 2.6x Toyota's market cap now and Toyota made 24x as many cars in 2019. I don't see any way "future performance" can make those numbers ever work. And I assume that is why they keep shoveling this crap to retail investors.

elcomet• 6 years ago

Probably because some investors believe that Tesla will achieve full self driving in the next 5/10 years. If this happens, Tesla might be worth much more than 2x Toyota.

burnte• 6 years ago

Tesla has something Theranos and Enron never had: actual products you can buy and that have a real market. Theranos had a pied piper song, and Enron became trading platform with cooked books.

ohiovr• 6 years ago

Tesla sells more stock than cars.

Tesla to raise up to $5B in share offering, its second in three months

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