1/ Someone asked me the other day about the possibility of Tesla doing a sizeable equity raise now that the stock has run. My answer was “size not likely at $325.” Here’s why:
2/ Let’s look at 2q19, when the stock bottomed at $178. 2Q encompasses the sharp decline in the May-June 3rd timeframe post-2019 equity offering when the flippers that deal was placed with did what flippers do.
3/ Here’s the net adds in 2Q for top 45-ish net change buyers. I count about 6.92mm shares. Assuming an average cost in 2Q19 of $225, that results in about $1.4 bil in value. That’s a lot of stock and probably close to what he needs now to solve his problems. 
4/ Ask yourself this: If I added a good chunk to my existing position at $225-ish/share, why would I buy an equal amount at $325/share? If it goes to $355 I’ve made 10%. Is that enough? Investors in AAPL made 7% in the last two weeks. Other names are just easier.
5/ And what would be the likelihood Tesla stays up at $355 post offering? Have to assume any deal done with a mid-3 handle gets flipped, just like last time. Whole exercise becomes a game of musical chairs.
6/ About 1.6mil of the 6.9mil shares bought in 2q19 was retail. ARK, recently a seller, was another 400k shares in 2Q, almost doubling its position (will get to ARK in a subsequent post). Absent Sumitomo, existing holders added about $1.1bil to existing positions.
7/ The better question is does anything less than $1.2 bil solve his problem? 3Q19 profitability was a scam as will become abundantly clear over time. This is a chronic money-losing operation. One could argue $1.2 bil in new equity doesn’t come close to solving his problem.
8/ What is the clearing price then on a new deal? Lower. All one needs to do is look to the last transaction with a 3-handle. Relentless selling in the weeks after. There is a reason for that. This company is not worth $40bil and the street knows it.
We can complain all we want about no price discovery in this market, but there was plenty of price discovery on the last deal, aided by the company’s horrendous operating metrics. Nothing has changed in a year. It’s only gotten worse.
