Will Tesla Debt Be as Hot as Tesla Stock?

Phillip Butler
August 8, 2017

According to EPA documents, discovered by Autoblog, Tesla will launch a Model 3 that comes with an 80.5kWh lithium ion battery that's claimed to be able to cover 500km between charges - around 150km more than the base model. Piper Jaffray Companies set a $386.00 price objective on Tesla and gave the stock a buy rating in a research note on Thursday.

Moody's disagreed and said Tesla faces "significant risks" as it attempts to take production to that level: "This targeted plan could put full-year production in excess of 350,000 units".

After the announcement, credit ratings agency Standard & Poor assigned the issue a "B-" rating. Both ratings are speculative-grade, or "junk".

Ever felt like owning a Tesla Model X but the pricing was out of your range? The non-recourse debt was absorbed from the SolarCity acquisition a year ago, and is largely secured by leased solar systems. "Then you'd go back to the equity markets and hope it's not too late" to raise more money.

Tesla recently began its production of the estimated 500,000 Model 3 pre-orders that it has received since it was announced past year.


Tesla also is involved in installing solar-paneled roofs and producing batteries that can store the energy and power homes. During early conversations with investors, Tesla has been offering to pay around 5% on the notes, according to two people with knowledge of the matter, who asked not to be identified as the discussions are private. The Model 3 starts at $35,000, roughly half the cost of the base Model S sedan, and has racked up nearly half a million net reservations since the company began taking refundable deposits previous year. Beyond the Model 3 production ramp, Tesla also intends to expand support infrastructure, including its Supercharger and service networks to accommodate a larger customer base. Jonas believes that Tesla will deliver only 2000 model 3 cars in 2017 and 90000 in 2018.

Tesla had a cash position of $3 billion at the end of last quarter and Musk said that he would like to keep it over $1 billion.

In a statement on Monday (7 August), the U.S. carmaker said it will raise the funds via the selling of bonds to institutional investors.

When Musk was asked last week if he would like to raise more cash as a buffer, he said the company was considering a debt offering but not an offering of stocks.

Tesla Inc shares fell $0.62 (-0.17%) in premarket trading Monday.

Other reports by Ligue1talk

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