The $5 billion in new equity the company plans to sell is about twice as much as it has ever issued before . The raise should also even out Tesla's cash-to-debt position on its balance sheet, at roughly $14 billion on both sides. As far as the cash side is concerned, the new tally is notable: Tesla used to feel pretty good if it had $1 billion on hand.
The execs running the traditional car business look at this with slack-jawed astonishment, and not for the reason you might think. Market caps aren't an especially relevant metric when dealing with companies that have been around for a hundred years. Automakers are far more concerned with how much money is flowing through their operations, metrics calculated through measures such as free cash flow and return on invested capital.
Tesla, by contrast, basically sells more of itself today than what existed yesterday. You could call it free money, and you'd nearly be correct. It is nearly riskless, as long as Tesla doesn't go the convertible-debt route, as it has in the past. In that case, debt that can't be transformed into equity, because a stock-price milestone hasn't been met, carries the risk of taking cash off the balance sheet or requiring other forms of fundraising to manage the payoff.
Tesla's operational costs are also about the same or even higher than a legacy carmaker, so it isn't as uniformly efficient at the use of its capital. Investors have been more than compensated for that risk by a stock price that's been tearing ever higher for a year . But if Tesla ever slowed down — and as it expands, it might, because global automating operations are challenging to manage — that risk might start to bite.
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