The raise will dilute earnings for common shareholders, so definitely a downward force on stock price. That being said, this investment and the recent raise you alluded to should clobber the put skew.
This is not a new raise. The filing indicates shares were primarily purchased on the open market and then topped off by the Goldman-led round earlier this month. No new dilution here.
fair enough. so if it's not new shares, put skew should remain strong as there is still non-trivial risk Tesla runs out of cash. And probably at least a small positive push to stock price as investors would reasonably bet that Tencent could be called on to buy more shares.
>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.
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?
>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.
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
One of life's little mysteries is that you almost always lose money if you invest internationally. A friend of mine says it is because the locals know what is going on better than you do.
Tencent was a major investor in Magic Leap and the Saudi Sovereign Fund invested heavily in .coms in early 2000. It is definitely not a sell signal, but I would not buy what Tencent is buying.
Most of my investments are in stocks and funds outside of where I live (Netherlands). Guess which parts of my portfolio aren't doing so well? The EU bonds.