The Pricing Strategy of Stock Issuance between Tesla and Goldman Sachs from the Perspective of Game Theory

Feiyang Zhu ()
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Feiyang Zhu: Hong Kong Shue Yan University, Faculty of Commerce

A chapter in Proceedings of the 2025 International Conference on Hybrid Commerce, Human Capital, and Economic Dynamics (ICHCH 2025), 2026, pp 660-669 from Springer

Abstract: Abstract The new energy vehicle industry is a capital-intensive sector characterized by rapid technological change. These features complicate stock pricing. Power battery development and super factory construction require continuous investment, while intensifying technical competition and declining subsidies increase valuation uncertainty. Tesla, as a market leader, has experienced significant valuation fluctuations, reflecting the pricing challenges faced by technology-driven automakers. Underwriters play a central role in this process. Although they may lower prices to attract investors or raise them to maximize commissions, Tesla’s 2020 offering was atypical: the issue price was set 7.7% above market value, yet Goldman Sachs charged only a 0.5% commission—far below the 2–3% industry average. This study examines this paradox through the lens of signal game theory. Tesla’s case demonstrates that greenshoe options effectively resolved the conflict by rebalancing the risk-reward structure: Goldman Sachs over-allocated 15% of shares and earned United States Dollar (USD) 248 million from the subsequent price increase. This outcome indicates that underwriting contracts have evolved into mechanisms that facilitate credible signal transmission. Within this framework, high prices serve as signals of high firm quality (θ=H), while underwriters achieve incentive compatibility through low fees and strategic use of greenshoe options. A dynamic game model identifies the conditions under which the “high price – low commission” equilibrium exists, providing a theoretical foundation for financing strategies tailored to technology-driven enterprises.

Keywords: Signal Game; Green-shoe Option; Separating Equilibrium; Goldman Sachs; Tesla (search for similar items in EconPapers)
Date: 2026
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DOI: 10.2991/978-2-38476-585-0_75

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