undefined | Better HN

0 pointsprolly_a_moron9y ago0 comments

>The raise will dilute earnings for common shareholders, so definitely a downward force on stock price.

The stock is detached from reality.

It's my understanding that this was another offering, so, essentially, Tesla sold 5% to Tencent at an average price of $217 and change. Current shareholders get diluted. Prices go up.

I don't get it, but I'd love an explanation. Were people, prior to these capital raises, concerned Tesla couldn't raise any more money? That would make sense, but certainly isn't the sentiment I gathered from my travels.

0 comments

hangonhn9y ago

How is that really any different from any Silicon Valley company raising a new round of money? So long as the valuation goes up enough to compensate for the dilution, the per share stock price will be the same or higher. I'm not saying the valuation is correct but the fact that dilution happens and stock price goes up isn't that had to reconcile, right?

prolly_a_moronOP9y ago

>So long as the valuation goes up enough to compensate for the dilution, the per share stock price will be the same or higher

But per stock price is the "valuation".

My comment re: being detached stems from the fact that on Day X, you can buy Tesla for price $Y. Then Tesla sells more shares (dilution). So now each individual share represents a smaller proportion of company ownership...yet the next day people are willing to pay more for that smaller ownership.

Obviously there are far more dynamics at play; but generally, dilution should cause the price to drop.

salesguy2229y ago

It seems to me that people viewed Tencent's purchase as signifying confidence in Tesla from a legitimate, cash-stacked player.

As a result, it was all aboard the hype-train for retail investors to secure their seat in yet another speculative rocket ship.

Tesla's ability to deliver has been in question for a bit. This cash will be used as fuel to prevent the rocket ship from experiencing a sudden, gravity-induced trajectory into the earth's crust

j / k navigate · click thread line to collapse