Is it time to short Tesla's stock before the new offering

Tesla Inc's (TSLA) burning money, but shareholders are the likely ones to blister and feel the pain.

The company's shares have risen 45% in the roughly three months since last selling stock to the public, and that should make recent entrants into the shares as they move toward $400 very nervous.

The standard 90-day corporate equity lockup period for Tesla, following its $402.5 million stock sale of March 16, ends Thursday. As a result, Tesla will be free to conduct another stock offering as soon as Thursday, which is a real possibility given the electric car company's debt situation, partly due to its Solar City investment, and need for additional cash. Any new issuance the company may seek would likely need to take place before July, which is when Tesla issues its quarterly report on car sales. Alternatively, an offering could come in late August after Tesla issues its quarterly financial report.

One investor, who is short Tesla's shares, suggested that he believed the issuance this time around will be for a much larger amount than the most recent $402.5 million 1.54 million share offering, based on the company's financial needs for the coming months. A large follow up secondary offering would dilute Tesla's shares and likely lead to a drop in its share price.

In March, Tesla sold 1.54 million common shares at $262, raising a total of $402.5 million.

The stock has risen 45.2% since that offering, compared to a slightly less than 2% gain for the S&P 500.

Tesla shares were up 1.3% to $380.65 at Wednesday's close.

Source: Bloomberg Pro Terminal

Jr Trader Alexander Kumanov

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