Tesla is finally cashing in on its stock price, offering $2B in new stock
Time to get money... Tesla's stock has been having a moment — its market cap is now $144B, worth nearly double Ford and GM's combined $83B value. Now, Tesla is cashing in by issuing $2B worth of new stock — 2 weeks after Elon said raising money "doesn't make sense." Tesla stock dipped at first (because new shares dilute the value of existing shares), but quickly bounced back.
Unusual move for a large, public company... but it makes sense. That's because swings in a stock price don't directly affect the company -— A Tesla stock surge doesn't influence its bottom line. Unless the company decides to issue and sell new shares:
- IPO: An Initial Public Offering price does matter, because the company is directly selling new shares for the first time to the public (the higher the stock price, the more $$$ the company collects).
- Secondary Market: Once those shares are in the hands of regular investors, we are the ones who benefit or lose from the stock price's rise/fall. When you own a stock and sell it high, you get money, not the company.
Tesla shares are kind of like second-hand Gucci bags... Gucci only makes money off the initial purchase — not when the original buyer sells the special edition purse for a higher price years later. Neither do publicly-traded companies when you sell their shares. But by offering new shares to the public, Tesla can raise cash to fund its projects, like the 4th Gigafactory that's currently finding space in a forest near Berlin.