Tesla Can’t Believe Its Luck! 🍀

Table of Contents

Tesla Can’t Believe Its Luck!

Elon has struck while the iron is hot, cutting a deal with Mr. Market at his most euphoric. Tesla’s on the cusp of securing a round of funding that buys it the time to become profitable and actually earn its market value!

Carried away by the mob mentality, Tesla is now valued higher than Ford and General Motors combined. That may be justifiable in two more electric decades, but it’s hard to justify such a price today without some extreme financial gymnastics. Aswath Damoradan, the “dean of valuation” at New York University, says Tesla needs Volkswagen-like sales and Apple-like profit margins to be worth anything like $700! Wait, $800!

Of course, Musk wouldn’t have set Tesla up as a for-profit organization if there wasn’t any promise of good economics down the line. The company’s been a money pit so far, but if growing delivery numbers affords it the economies of scale to force down production line costs, fortunes could reverse very quickly.

The company will need to stay funded until that point, so it’s reliant on Elon’s big vision to keep the government and debtors patient. They need to believe in Tesla, and then Tesla needs to monetize that belief.

One of the ways it could do that is by again selling equity to the market, just as it did during its initial public offering (IPO). Bullish investors take receipt of millions more shares, and Tesla gets a one-time hit of funding that reflects the market capitalization investors are currently willing to pay for (not bad at the moment!). Of course, nobody likes giving away ownership of their company, but there’s always a price!

Investors have given Musk the opportunity to cash in on a short-term mania, but it’s at their medium-term loss when the market corrects, adjusting for both the generous growth assumptions and the extra, dilutive shares in float. However, it’s potentially all for investors’ long-term gain if the $2 billion scooped up in funding helps Tesla come of age financially and turn a profit. These are the financial gymnastics we were talking about!

Let’s hope investors don’t expect their money back, at least not for the time being. Tesla has time travelled in terms of its valuation and is accepting this free market gift pending underwriter’s approval. Elon’s smiling, issuing those shares, and cashing that two-billion-dollar check to shore up Tesla’s balance sheet. “Funding secured!”

Share:
More Posts
PGA Tour Enters Investment Talks 💪

As reported on Thursday, both Endeavor Group and Fenway Sports have displayed interest and begun discussions to provide investment in the PGA Tour.

Nike Just Didn’t Do It 📉

Providing one of the biggest earnings reports of the week, $140 billion shoe and clothing retailer Nike posted a significant slip.

Market Recap – September 28th 💰

After the 10-year Treasury yield bond fell off from its 15-year high, investors added some value back into the market, focusing all short-term attention on Friday’s PCE price index reading.

The Crude Oil Bust 🛢

Surging global crude oil prices, driven by factors like OPEC+ production cuts have pushed U.S. West Texas Intermediate futures to over $95 per barrel.

Get your daily Invstr Crunch

Get the market news and updates you need, delivered to your inbox or available on our daily podcast.

Risk Disclosure:

Invstr is not a bank and banking services are provided by Vast Bank, N.A.

Brokerage and Banking services are currently only available to U.S. residents.

Invstr app and web services are provided by Invstr Ltd. Advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC) details of which can be obtained here. Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value.

Investing involves risk and can lead to losses. Past performance does not guarantee future results.

Invstr app and web services are provided by Invstr Ltd. Invstr+ advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC). Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value. Vast Bank N.A. a nationally chartered bank and member of the FDIC, provides the banking products, including the products and services related to digital asset accounts. As with any asset, the value of Digital assets can go up or down and there can be a substantial risk that you lose money buying or holding digital assets. You should carefully consider whether trading or holding Digital assets is suitable for you in light of your financial condition. Your digital account does not support wallet to wallet transferring of your digital assets (i.e. cryptocurrencies) outside the platform. Any Digital Assets in your digital asset account are not insured by any government entities, including but not limited to FDIC or SIPC. The Invstr Visa® Debit Card is issued by Vast Bank, N.A. pursuant to a license from Visa U.S.A Inc and may be used everywhere Visa debit cards are accepted. Invstr Ltd, Invstr Financial LLC and Invstr Securities Ltd are subsidiaries of Marketspringpad Holdings (collectively “Invstr”) and Invstr is solely responsible for the application services and website content.

Watchlists provided when users first access the service are not a recommendation to invest. Instead they are provided to help users better navigate the service. Users are free to edit and create their own watchlists. From time to time, Invstr will suggest instruments solely based on an individual’s interest and the interest levels of the Invstr community. The statistical and portfolio builder models generated by Invstr do not reflect actual investment results and are not guarantees of future results. Comments provided by Invstr leaders, influencers or members of the Invstr Community are not recommendations and should not be construed as such. Invstr does not endorse the content or the positions posted by them. Their investment approach, and that of the models provided by Invstr, may be different from yours and may not be appropriate for you.