| > probably much smarter to distribute their lender among multiple entities than one giant bank that would have leverage on them The banks you see on the front page of the prospectus are not lenders in this transaction, they are underwriters. They are executing transaction and distributing the converts to the institutional investors (long-only and hedge funds). At any rate, underwriters and investors will have exactly zero leverage over Tesla following transaction (debt holders have no voting power). > would use a portion of the money to inflate their share prices via a small buyback Not at all. They are concurrently offering common shares, so buyback would make zero sense (i.e. buying and selling shares at the same time). They plan to use proceeds for general corporate purposes (Model 3!) and to buy a call spread they will overlay on top of the convert to synthetically increase the effective conversion premium above the premium that convert will price at. This is done to reduce potential dilution down the road. > Tesla is raising capital without diluting their shareholders... Correct - this convert will likely fly off the shelves and the conversion premium will be high (perhaps up 30-40% from tomorrow's close). On top of that, they will enter into the call spread that will bring the conversion premium to up 50% or 75% (depending on the structure they pick) from tomorrow's close. > Also the maturity date of 5 years is rather interesting This is standard duration for convertible debt. Generally they are structured with 5 year or 7 year duration, but 5 years sell better (pricing is also tighter). Overall, smart deal for Tesla and net positive for shareholders. |