Tesla seeks up to $2.3 billion from share, debt issues

03 May, 2019, 02:10 | Author: Manuel Hopkins
  • Tesla Roadster II

Many analysts, on the other hand, have been saying for several quarters that Tesla needs to raise capital-in the region of US$2 billion to US$4 billion-to start delivering on its bold promises, or as Tesla bears have claimed, simply to keep the company afloat. The surprisingly large loss followed the company's first back to back quarters of profitability. Tesla stock, which had plunged 30 per cent this year, rallied 4.1 per cent to $243.61 at 9:39 am in NY, and its bonds advanced.

As promised, Tesla's Model 3 is now available to order in the United Kingdom. Musk changed his tune after the first quarter, when a record decline in vehicle deliveries and the company's biggest-ever debt payment depleted its cash balance to a three-year low of US$2.2 billion.

Tesla's 5.3% bonds due 2025 were among the best performers in the USA high-yield market on Thursday morning in NY, rising nearly 2 cents on the dollar to 87.5 cents, according to Trace.

John Zhang, an analyst with research firm IDC, said that Tesla is going out of its way to convince customers that they absolutely should not buy the 150-kilometre auto.

Before Tesla's announcement on Thursday, however, analysts speculating about a capital raise had cautioned that the company had missed optimal timing - last year's third quarter, when the company posted a profit. Tesla has lost more than $6 billion since setting out to revolutionize the auto industry.

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The convertible notes announced on Thursday are seen carrying a coupon rate of between 1.5% and 2.0% with a conversion premium of between 27.5% and 32.5% over the reference price for Tesla shares at the time of the sale, according to a trader who saw preliminary marketing materials for the deal.

Tesla's market turmoil could also be worsened by a massive share sell-off by Fidelity Investments.

Tesla is aiming to sell stock worth $642 million at Tesla's current share price. That bond can be converted to equity at a price of $327.50 per share, which is now around 36% above Tesla's current share price of around $240. Note that in the USA, this number is far lower at $4,500 - and while the US does have cheaper gas than the United Kingdom, I'm still not certain that I understand Tesla's math here.

In a sign of Wall Street's concern, Goldman Sachs recommended selling Tesla shares in an April 25 report, putting a 12-month price target of $200.



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