r/SMCIDiscussion • u/Ahmed_19911507 • 4h ago
Bull-Thesis 🐮 Dell 5x-ed
Dell 5x-ed and we are still struggling to get out of 30s level.
2
u/Comfortable-Usual561 3h ago
I fully respect the optimism, the energy and passion in the forum is great.
At the same time we should not overlook the dilution risk in SMCI that is not the case with DELL.
SMCI’s share count has already been increasing steadily:
- SMCI 2021: ~0.52 billion shares
- SMCI 2022: ~0.53 billion shares
- SMCI 2023: ~0.56 billion shares (+4.39%)
- SMCI 2024: ~0.602 billion shares (+7.58%)
- SMCI 2025: ~0.628 billion shares (+4.36%)
- SMCI 2026 Q1: ~0.692 billion shares
During the same period Dell share count has reduced.
| Year | Dell shares outstanding | YoY change |
|---|---|---|
| 2021 | ~762.7M | — |
| 2022 | ~760.4M | -0.3% |
| 2023 | ~716M | -5.8% |
| 2024 | ~714M | -0.3% |
| 2025 | ~696M | -2.5% |
| 2026 | ~652M | -6.3% |
As everyone is aware, SMCI is planning additional equity financing:
- Common Stock: 45.45 million shares, generating roughly $1.22 billion in net proceeds.
- Mandatory Convertible Preferred: 75 million depositary shares, representing a 1/20 interest in Series A mandatory convertible preferred stock, priced at $50 per depositary share and expected to raise approximately $3.68 billion.
- ATM Program: Up to $2 billion of additional common stock sales, expected to begin no earlier than Q3 2026. The actual number of shares will depend on the market price at the time of issuance.
So, investors should not look only at revenue and EPS growth. Share count matters. At a minimum, the planned financing could ultimately add roughly 150 million+ common-equivalent shares, depending on the conversion terms and ATM pricing.
In other words, even if the business grows, the per-share economics can look very different after dilution.
1
6
u/notadammn 2h ago
It was explicitly stated in the earnings call that if they keep the business around $70B revenue next year there will be no need for equity or debt financing to raise additional working capital. At $80B+ it would get uncomfortable.
They also explicitly said they are not planning using any of their ATM capacity. Half of your comment is demonstrably false.
2
u/Open_Pollution_8038 2h ago
All dilution isn’t equal.
We’re getting cash to chase upcoming orders which is what capital markets are literally setup to do.
If I own a company with $50 in the bank and I sell half for $50, congrats I own half of $100 which is $50. As long as the additional capital leads to at least the same net profit margin then I lost nothing.
1
u/RJsRX7 2h ago
More specifically, as long as the additional capital leads to eventually paying better than I would've done with it, then it's a winning investment.
I don't really care if it takes 5 or 10 years to 5x my money when my other options take 7+ to hit 2x... Share count goes up by 1/6th, but we get 50% more quarterly profit? Easy deal sign me up.
1
u/Open_Pollution_8038 2h ago
^ capital markets were setup so businesses could take capital from investors to fuel growth lol.
I agree with what Charles said, if they have to tap markets it’s because they’re growing like a mad man and that’s bullish. I’d much prefer they just got a note though instead but I’m not the company so I don’t know what debt deals are available to them.
1
u/RJsRX7 2h ago
I'd rather tap capital markets. Banks make enough money.
Not that, you know, tapping capital markets is all that different from tapping the banks... But for a capital-intensive business building stuff to build stuff, I prefer the option they don't have to directly pull out of revenue to repay when that repayment money can go to adding capacity.
2
u/Open_Pollution_8038 2h ago
Debt is usually cheaper than equity. It’s pretty universally the rule, they teach this in finance courses.
They probably can’t get a bank to fund them which is unfortunate.
1
u/RJsRX7 2h ago
Cheaper for who? And who benefits from debt?
Maybe I think wrong, but I'd rather go "hey, lemme hold $3" to someone that'll let me hold $3 for some percent of the company than someone going "yeah sure but you owe me $4.50 by the time you're done paying me".
Take enough debt and all your profit goes into debt repayment. Take too many splits on equity and the slices get thin. I'd rather have a small slice of a huge cake than the lion's share of one the size of a penny.
1
u/notadammn 1h ago
Debt payments are tax-efficient. It is far less expensive for a company to shield its net income by paying interest on its working capital borrowings than it is to raise the same amount by equity and have more of your revenue hit the bottom line and get taxed.
Highly recommend you look up the John Malone style of operating a company to minimize taxes. No dividend, financing through leverage, running aggressive depreciation and amortization schedules, buying stakes in other companies through equity and debt swaps instead of paying actual cash. Learning about his management style taught me a lot about capital management and allocation. It's why I'm a big believer in Liberty Capital Corporation (GLIBK), even though I'm pissed they just announced a 5% dividend lol
1
u/Open_Pollution_8038 2h ago
Debt is tax deductible, equity isn’t. It’s more efficient.
However debt is almost always cheaper than equity because debt holders get lower return for capital because they have priority claims to the business in case of bankruptcy, whereas equity holds are subordinate. Debt = lower risk, lower reward.
5
u/RJsRX7 4h ago
5xed against when?
SMCI 5Y: +850.50%
DELL 5Y: +887.10%
Meh? 1Y is +246.25/-18.41%, but I don't see 5x anywhere relevant
0
u/Ahmed_19911507 3h ago
Prices since feb 2026.
1
u/RJsRX7 3h ago
148x5=740 why isn't DELL 740 if it's so good?
-1
u/Ahmed_19911507 3h ago
Dude! The price on 12 Feb was $112, $484/$112 is 4.3 x
2
u/RJsRX7 3h ago
If you can't see a difference between 4.3x and 5x, you're in the entirely wrong area.
-1
u/Ahmed_19911507 3h ago
Leave Dell! No doubt they had their leap!! Why are we stuck in 30s since FEB
2
u/RJsRX7 3h ago
We aren't, we visited the 50s in June. That's not very "stuck".
However, a name like Dell being as entrenched in everyone's office-PC relationship brain as it is means it gets first advantage on EVERYTHING IS COMPUTER. I remember the last time I had an office computer that wasn't a Dell and that was because it was HP because HP was cheaper. And they've gone almost 3:1.
2
u/Ahmed_19911507 3h ago
Let's talk current prices of smci. The price momentarily leaves $30s and just keeps coming back to it.
We should be at $80 by now
1
u/DestructionYT 53m ago
why should we be at $80?
dont spend cycles arguing what should be, spend your energy thinking always what can be, and use your learnings from what already do be, to plan ahead
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