Tesla is making a risky move by issuing $1.5 billion in debt
Aug 08 2017
The non-recourse debt was absorbed from the SolarCity acquisition previous year, and is largely secured by leased solar systems. "And then in Germany, we've just heard announcement of a new plan for a $1 billion factory on batteries", Giles Keating, now the chairman at investment consultancy Werthstein Institute, told CNBC Monday. Also, insider Jeffrey B. Straubel sold 109,100 shares of Tesla stock in a transaction dated Tuesday, May 9th.
The high numbers associated with the MPGe ratings of electric cars underscore how efficiently they use energy, compared to the waste of 70 to 75 percent of the energy in gasoline as heat and noise in a auto that burns gasoline in an engine. Kallo recommends investors to own Tesla stock going into the model 3 ramp, adding that a positive reception from early buyers could significantly increase the value of brand Tesla. Investors desperate for income have depressed the yield gap between single-B-rated junk bonds and United States Treasury bonds by almost 2 percentage points over the past year, to 3.59 points, according to Bank of America Merrill Lynch.
Tesla's bond will price later this week after several days of meetings with credit investors, who will weigh factors including the absence of a borrowing history, its lack of profit and its high cash-burn rate against its growth potential and its attractiveness as an environmentally-friendly "green" issuer. The interest rate on this latest round is yet to be determined, but it'll certainly be costly. Although Musk's entrance was reminiscent of Tony Stark's entrance in Iron Man 2, the unveiling of Tesla's newest foray into electric cars begs the question - will the Tesla Model 3 be the safest auto on the road?
Musk anxious some investors when he warned that Tesla was about to embark on "at least six months of manufacturing hell" as it tries to get Model 3 production to 5,000 cars a week by December.
Tesla expects to manufacture 5,000 of the sedans every week by the end of 2017 and double that in 2018.
Tesla burned through a record $1.16 billion in cash in the second quarter, driven by spending on capacity for the Model 3 and boosting battery output.
Capital expenditures in the second half of 2017 are expected to be $2 billion, which would consume much of the $3 billion in cash that Tesla had at the end of June. "Us, because we're their biggest customer", Musk said. While RBC capital markets analysts were also positive exiting Q2, analysts at Goldman Sachs, Morgan Stanley and Cowen weren't too optimistic, citing huge Capex and downside risks to the model 3 production ramp-up.
Shares of Tesla dropped about 0.3% to $356.65 on Monday morning on the news.