How much could Tesla dip into their 20B market cap?

[dspwhite]

Newbie investment question really, but if Tesla really wanted to, how much could they dip into their 20 billion market cap they have for expanding their company (e.g.: building new factories, including that giga-size battery factory)?

Could they just do it, or would they need 'permission' from their thousands/millions of investors?

 

[Mario Kadastik]

Well the market cap is just a virtual number based on current share price and number of issued shares. Tesla gained the capital when they issued stock in IPO and in any secondary offerings. The price movements after that have nothing in them for the company except prepping it for additional offerings at a higher price (pretty much what Tesla did after the big run-up after last quarterly conf call). Now I don't know wether they could get loans on their stock in any way, but I doubt it. Effectively the only way to utilize the market cap is spew out more shares, it's not like there's a bank holding $20B that Tesla could use sadly.

 

[dspwhite]

Thanks.

I thought the whole idea of investing was so that a company could use that money to grow further. I invested quite a few grand of my own cold, hard cash, and I'd love Tesla to be able to use that, but somehow they can't?

 

[Curt Renz]

Thanks.

I thought the whole idea of investing was so that a company could use that money to grow further. I invested quite a few grand of my own cold, hard cash, and I'd love Tesla to be able to use that, but somehow they can't?

It's a common misunderstanding that the money from one's investment in a company's shares goes to that company's treasury. That is only true in the cases of initial and subsequent public offerings. Ordinarily the shares one buys through a stock exchange are from a shareholder who is selling at the same time. Hence that money goes to the previous shareholder and not the company.

 

[FANGO]

I think it's fair to say that investing does help the company, though. Buy showing your faith in the company, by buying shares and not selling them, you help to buoy the stock price, which helps the employees of the company through stock options and such, helps the company raise money if they ever do a secondary offering, helps public opinion of the company, etc. So it's not so much that you're giving Tesla your money to use, but you are still "helping." And, in return, Tesla helps you by executing well such that their stock price goes up.