How do stock offerings affect stock prices: Investment opportunities seen from Tesla and TSMC

2025-12-24 19:49:01

Stock issuance (cash capital increase) is a common way for listed companies to raise funds, but the most concern for investors is often: how will this affect the stock price? Will it go up or down? The answer is more complicated than you might think.

Two Classic Cases Reveal the Truth

Tesla’s Secret to Capital Increase

In 2020, Tesla announced a cash capital increase, planning to issue new shares worth about $2.75 billion, with a price of $767 per share. The market reaction was surprising—rather than falling, the stock price actually rose.

Why was this the case? The key lies in market confidence in the company. Tesla was very hot at the time, with investors full of expectations for its global expansion plans and technological innovations. The funds raised were used to build new factories and meet global market demand, which was believed to boost the company’s future market share and overall value. As a result, the announcement of the capital increase triggered a rally.

TSMC’s Steady Capital Increase

On December 28, 2021, TSMC announced a cash capital increase to expand its business scale. As the world’s leading semiconductor foundry, TSMC’s plan was immediately supported enthusiastically by the market. The stock price rose accordingly, and existing shareholders actively subscribed to new shares to maintain their ownership ratio.

TSMC was able to smoothly carry out the cash increase due to its stable performance and solid industry position. Investors believed that the funds would be used for R&D, capacity expansion, and new technology investments, ultimately translating into growth in performance.

The True Mechanism of How Cash Capital Increase Affects Stock Price

Three Conditions for Stock Price Rise

Cash capital increase does not necessarily lead to a decline in stock price. Under the following circumstances, the stock price may actually rise:

Strong Market Demand: If the new shares are in high demand, it can support the stock price.
Optimistic Investor Outlook: If the market believes that the funds raised will bring good returns and support company development, it will have a positive impact.
Active Shareholder Participation: When existing shareholders strongly support the increase and purchase new shares to maintain their stake, it can help stabilize the stock price.

Three Risks of Stock Price Decline

Conversely, the following situations may put downward pressure on the stock price:

Excess Supply: If the issuance exceeds market demand, the stock price may face downward pressure.
Lack of Market Confidence: If investors worry that the increase will dilute their equity or harm profitability, they may sell off.
Dilution of Ownership: Shareholders who do not participate in the increase will see their ownership percentage diluted, potentially facing actual losses.

A Complete Overview: The Full Process of Cash Capital Increase

What is a Cash Capital Increase?

A cash capital increase is when a company issues new shares to existing shareholders to raise funds. The purpose of such an increase usually includes expanding operations, investing in new projects, repaying debts, optimizing capital structure, or responding to emergencies.

Standard Process of Capital Increase

The company decides on the target amount and announces the plan.
It sends a notice to shareholders, specifying the share price, number of shares to be issued, and total amount.
Existing shareholders decide whether to participate based on the notice and pay the corresponding amount.
The company calculates the total raised funds and issues new shares to participating shareholders.
After completion, the company’s registered capital increases, and shareholders’ ownership ratios are adjusted accordingly.

Pros and Cons of Cash Capital Increase

Advantages

Rapid Fundraising: Helps the company raise large amounts of capital quickly for expansion or major investments.
Financial Structure Optimization: Increasing registered capital can improve debt ratios, enhance credit ratings, and reduce future financing costs.
Market Confidence Boost: Seen as a positive signal, indicating the company has fundraising ability and is committed to long-term development, which can boost investor confidence.

Risks

Ownership Dilution: Issuing new shares reduces existing shareholders’ ownership percentage; if the issuance price is below market price, dilution effects are more pronounced.
Uncertain Market Reaction: Investors’ attitudes toward the increase directly influence the stock price. If skepticism prevails, the stock may decline.
Increased Financing Costs: Involves costs such as underwriting fees and issuance expenses; if the shares are issued below market price, it can weaken the company’s value.

When Can Investors Receive Shares After Participating in a Capital Increase?

After participating in a cash capital increase, investors need to go through the following stages before receiving new shares:

Company Procedures: The company sets a deadline for the increase. After shareholder confirmation and calculations, new shares are issued, which usually takes several weeks to months.

Exchange Approval: If the company’s stock is listed, the new share issuance requires approval from the stock exchange, which may take additional time.

Shareholder Registration: The company must register participating shareholders, which is another necessary waiting step.

Therefore, investors should be patient after subscribing to the new shares and continue to monitor the company’s fundamentals and market trends.

Conclusion: Cash Capital Increase Does Not Guarantee Rise or Fall

Stock prices are influenced by many factors—company profitability, industry outlook, overall economic environment, policy changes, and more. A cash increase is just one piece of the puzzle. The cases of Tesla and TSMC show that when a company has clear purposes for the increase, a bright market outlook, and strong investor confidence, a cash increase can actually serve as a catalyst for rising stock prices. Conversely, if market doubts the company’s prospects, the increase may trigger a decline.

Investors should analyze the impact of cash capital increases on stock prices from multiple dimensions—company fundamentals, purpose of the increase, market environment—and avoid making investment decisions solely based on the news of the increase.

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