Hacker News Reader

Comment by TAForObvReasons | Hacker News Reader

> All to screw with the shorts, who really have no power whatso ever to hinder Telsa.

If Tesla wasn't burning through cash and didn't need an ever-inflating stock price in order to keep the house in order, the shorts would be powerless and in all honestly would back off. The only reason the shorts have power is that Tesla's future is currently heavily dependent on its stock price.

View on HN

Can you explain how that works? I thought that once a company's stock was listed, third parties just trade it amongst themselves. How does that activity affect Tesla in terms of how they're able to execute?

There's a clause in Tesla's debt that if the share price is >$360, they can pay their bond notes with stock shares. If it is <$360, they have to pay their debt payments in cash. This obviously has a massive impact on Tesla's already precarious cash position.

Public companies can raise money through "secondary" offerings of stock. That's why an IPO is called an "initial" offering.

Tesla has various options for raising cash including selling stock or bonds. In the case of stock, a secondary offering would come at a price relative to the current stock price. In the case of bonds, bonds are in almost all cases higher in the capital structure than equity. Having a large "equity cushion" makes bonds more attractive because there is someone else that will take losses before the bondholders.

Stocks prices are based off of two things really - current earning and perception of potential earnings in the future.

Tech stocks are infamously based largely on the second more than the first. Many do go reinvestment heavy like Amazon did for years before they started to post more profits.

Given the feedback loop impact things get weirdly circular in potential for success based upon others. Not in a something from nothing sense but in a giving what it takes to succeed sense.

Reply on news.ycombinator.com