Why Tesla Inc (TSLA) Stock Holders Shouldn't Sweat New Debt

Alan Olson
Августа 8, 2017

Tesla said last week that it had 455,000 net pre-orders for the Model 3, which has a $35,000 base price, and that the sedan was averaging 1,800 reservations per day since it launched late last month.

Tesla is getting critical raves for its new Model 3, its first mass market electric auto. Last year the company produced 84,000 vehicles, which was a gain of 64% from the prior year.

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The notes announced Monday would mature in 2025, though Tesla did not disclose interest rates or other terms of the securities.

Tesla will raise the money by selling bonds to professional investors, despite the company having $3bn in cash.

Tesla CEO Elon Musk acknowledged Tesla's ambitions to expand into these countries in last week's earnings call, saying that new gigafactories could pop up in these countries to make production more efficient.

Tesla does have cash holdings of $3bn, but the project is thought to be placing a strain on its finances. The company produced nearly 84,000 cars and sport utility vehicles a year ago.

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The rating agency said the overall company's "B2" rating was supported by the fact that if Tesla ends up in serious financial trouble, its brand name, products and physical assets would be of "considerable value" to other automakers.

Tesla chief executive Elon Musk congratulated the club on the record, which was issued by a public notary with a lawyer sealing the charge cap before starting the attempt, the club said.

While Tesla said that it wouldn't raise more capital through equity, it opened the door to revisit another round of debt through convertible notes. Deliveries for non-employees will begin in the fourth quarter of this year.

The company said this month that 518,000 customers have put down $1,000 deposits for the vehicle since March 2016.

"There is a well-developed track record of successful investments and generating returns on those investments", said James Albertine, a senior analyst at Consumer Edge Research, told Bloomberg. Back in March, it sold additional shares along with a five year bond to help fund its initial Model 3 production. The electric vehicle marker's cash burn, or negative free cash flow, came to $1.2 billion in the second quarter - almost double the $622 million spent in the previous quarter.

Solar power and battery storage now make up a small percentage of Tesla revenue, but it has high hopes for both.

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