How do falling stock prices affect Tesla’s business?

01/05/2018 | Bursa & Investitii | 583 views

How do falling stock prices affect Tesla’s business? Does it force Tesla to borrow cash at higher interest rates? Is the effect significant only if Tesla opts to issue new stocks?

If Tesla wants to raise more money by selling new shares, the lower the share price, the more shares it’ll have to sell to raise the money it needs.

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If Tesla chooses to borrow money instead, investors will look at the share price — a low price might suggest a lack of confidence in the company’s prospects — and may demand Tesla pays higher interest rates because it’s a riskier prospect.

Also, young companies, particularly ones without any cash flow, often pay their employees partly in stock options.

If Tesla’s stock price is low for a long time, employees might lose motivation because the value of their options may not be worth much, potentially impacting day-to-day operations.

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