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Will A Capital Raise Cause The Stock To Go Up Or Down?

Discussion in 'Tesla Motors' started by tander, Aug 12, 2012.

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What will a capital raise do to the stock?

  1. Up significantly

    1 vote(s)
    4.2%
  2. Down significantly

    12 vote(s)
    50.0%
  3. Neutral

    11 vote(s)
    45.8%
  1. tander

    tander Member

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    From the last conference call it sounded like they were seriously considering doing a capital raise this year, which I think is a good idea whether it's 30M or 150M. I automatically assume that would cause the stock to go down because of dilution concerns etc., but for for me it actually makes me more confident in the company. I see it as a positive because looking at their balance sheet, it's pretty reasonable to think that they might need cash relatively soon to get through the next year or whatever, so I would be happy to see them have more of a buffer. As an investor, I'd rather see some dilution than a financial problem, but I think most people might not see it that way. So anyway, I think it might be interesting to take a poll of what other investors think on the matter. Consider that this is the TMC, I'm guessing everyone leans toward the bullish, so maybe try to be unbiased if you can.
     
  2. KBF

    KBF Model S 2017

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    No, they were not seriously considering one. They said it was either "none at all" or very minor, and they didn't have a need to raise cash. Some 'journalists' made it sound like Tesla needed more cash now. Elon also tried to make it clear that even if they did at some point raise cash it would not be in the near future. It sounded like he was trying to phrase things carefully.
     
  3. smorgasbord

    smorgasbord Active Member

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    It sounded to me like they were considering one. The way Deepak said they shouldn't comment on it, then Elon said "not in the immediate future," but then couldn't explain what that meant. They did say it wasn't needed according to their plan, and that it would be to have a larger buffer.

    All of which tells me that they're not going do anything desperate that would make the stock tank. They might be talking to their original investors to see if they want to pony up some more money to get more, or they might be talking to new investors - but in any case I do think it would be something of a private placement rather than just issuing new shares on the open market. But, there will be some dilution and some concern over it, and so I think the stock will go down when it happens.
     
  4. brianman

    brianman Burrito Founder

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    Here was my interpretation:

    Q: Capital raise needed?
    A: Not really.

    Q: Capital raise wanted?
    A: Not really.

    Q: We investor types really think you should keep your options open for capital raise? It's only prudent...
    A: Yah, we'll keep the door open but don't really need it.

    Q: Oh, so you guys want to capital raise? Does that mean the sky is falling?
    A: We're keeping the door open but don't see a need for it, other than as an opportunity to speed up future development or offer comfort/cushion.

    Q: OMG, you're doing a capital raise?
    A (Deepak): We might consider a capital raise.
    <Elon's wheels are turning.>
    A (Elon): We don't need it. All is well. You guys are just digging. Will we keep the option open? Sure. But calm the hell down. We've got cars to focus on, and no longer have any financial concerns in doing so.
     
  5. markwj

    markwj Moderator, Asia Pacific

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    I got the impression that significant Model S deliveries would make them cash flow positive. The need to raise money would be longer term (Gen III investment?).
     
  6. smorgasbord

    smorgasbord Active Member

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    Here are the relevant sections from theQ2 CC (available here: http://seekingalpha.com/article/750201-tesla-motors-ceo-discusses-q2-2012-results-earnings-call-transcript?page=2&p=qanda&l=last:


     
  7. tander

    tander Member

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    Interesting results so far...also interesting that it sounds like most people in here don't want a cap raise. I guess it's a bit of a double edged sword.
     
  8. Citizen-T

    Citizen-T Active Member

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    There's going to be a capital raise, no doubt in my mind. Probably 1Q 2013.

    Elon seems to think that the technology to put BlueStar on the road is coming faster than originally anticipated, but he needs more capital to build out Tesla's production ability. They'll raise more cash to make that happen, rather than sit on the sidelines while a bigger car company jumps on the opportunity ahead of them.
     
  9. Discoducky

    Discoducky Active Member

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    With everything else being equal....As long as TM waits to announce after Model S has largely hit it's 2012 production goals, a capital raise won't hurt the stock
     
  10. NigelM

    NigelM Recovering Member

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    As far as a capital raise affecting the stock price....that depends entirely on the terms and price of any new issue.

    Also note: Tesla refusing to comment or discuss should not be taken as a secret plan to raise capital. As a company executive, even denying a plan can get you in big trouble with the SEC.
     
  11. tander

    tander Member

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    I'm wondering if they might pair a cap raise with the supercharger network announcement in Sept. What is BlueStar?
     
  12. jerry33

    jerry33 S85 - VIN:P05130 - 3/2/13

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    Bluestar is the TeslaMotorsClub code name for the model of Telsa that is targeted to have a base price of around $30,000.
     
  13. Doug_G

    Doug_G Lead Moderator

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    It will go up, but obviously not in the short term. If they need to raise more capital it will be to invest in the Gen III. If they are successful in launching Gen III Tesla could become a much larger company.
     
  14. Citizen-T

    Citizen-T Active Member

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    Agree. Timeframe makes a big difference here.

    1. The day they announce it the stock will drop significantly.
    2. In the month or two after the offering is announced, it will seem to have little affect (assuming all is well and still on track)
    3. In the long-term, TSLA will be up significantly more than it otherwise would have been because the extra capital allowed them to take advantage of some opportunities earlier than they could have otherwise.
     

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