Professor Elam

Weekend Nov 19

Elon Musk, like Santa Claus is everywhere.  He is shooting rockets into space, merging Tesla with Solar City, and promising an affordable 35K electric car in a couple of years.

But Tesla has yet to produce any cash flow to support itself. It has existed on government subsidy, and issuing stock and debt.

hTesla will likely need more cash in the future.

We are studying potential dilution in ACCT 3304. An expansion of shares by 50% would cut E/S in half, if Tesla had any earnings. This is the very reason for calculating potential dilution.

Tesla continues to remind me of another visionary, John DeLorean/ Delorean also relied on government subsidy and continued promises of future performance.

What does share dilution mean?

Why do we compute both simple and diluted earnings per share?

What does it mean for dilution of a firm, like Tesla, has no earnings?

What potential dilution has Tesla incurred since 2010?

Should this be of concern to Tesla shareholders, why or why not?

We have two chapters to complete, 16 & 17.