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So like, what's the difference between $161.88 and $184.48?

Discussion in 'TSLA Investor Discussions' started by twinklejet, Sep 4, 2013.

  1. twinklejet

    twinklejet Member

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    Might be a stupid question to some people, but I'm quite stupid so yea... If anyone can help demystify this for me that would be great :)
     
  2. ppl

    ppl Member

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    22.60
     
  3. ModelS8794

    ModelS8794 Member

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    2 items at play here.

    1) the convertible notes: an owner of a convertible note has the right to give their note back to tesla in exchange for tesla stock, but can only do this after the stock price has risen to $161.88 for a period of time. Once that price has been reached, we have the potential that share count will increase from debt holders swapping their debt and taking stock. To mitigate this risk of dilution, tesla purchased something called a convertible note hedge, which allows tesla to, in essence, take back every share of stock that the convertible note holders can demand.

    2) the warrants: that convertible note hedge was expensive, so to pay for it (or part of it anyway) Tesla sold warrants into the market. An owner of the warrants has the right to exercise those warrants in exchange for tesla stock at a strike price of $184.48

    The combination of the convertible note, the convertible note hedge, and the warrants all together leave tesla in the position that total shares outstanding will only increase once shares are above that higher $184 figure. But there are further particulars about the accounting for convertible debt vs warrants that introduce some caveats to that statement, and make the accounting a little more complicated for the true diluted share count during a reporting period where the share price is above ~$120 but below $184.
     
  4. Zaxxon

    Zaxxon Member

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    :biggrin:
     

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