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Tesla Seeks $1.5 Billion Junk Bonds Issue To Fund Model 3 Production (reuters.com) 159

As Tesla seeks fresh sources of cash to increase production of its new Model 3 sedan, the company announced on Monday that it would raise about $1.5 billion through its first-ever high-yield junk bond offering. "The debt offering marks Tesla's debut in the junk-bond market and the company will start road-shows on Monday, IFR reported, citing lead bankers on the deal," reports Reuters. From the report: Tesla has been riding high on investor expectations that its Model 3 will be a mass-market hit, with shareholders pushing its market value above that of General Motors Co and Ford Motor Co, the top two U.S. automakers that produce millions of cars each annually. But Tesla has yet to make an annual profit and its stock is a favorite among short-sellers, who continue to bet Tesla will fall short of its shareholders' high hopes. So far, Tesla has been raising money to pay its bills with a combination of equity offerings and convertible bonds, which eventually convert into shares. In March, the company raised $1.4 billion through a convertible debt offering. Following the announcement, Standard & Poor's assigned a "B-1" rating for the bond issue -- deep into junk credit territory. S&P also maintained its "B-" long-term corporate credit rating on Tesla. "We could lower our ratings on Tesla is execution issues related to the Model 3 launch later this year or the ongoing expansion of its Models S and X production lead to significant cost overruns," S&P said in a statement on the bonds. Meanwhile, Moody's assigned a junk "B3" rating to the bond issue and said the company's rating outlook was stable.
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Tesla Seeks $1.5 Billion Junk Bonds Issue To Fund Model 3 Production

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  • John DeLorean (Score:4, Informative)

    by CrAlt ( 3208 ) on Monday August 07, 2017 @08:55PM (#54960313) Homepage Journal

    To bad DeLorean isn't still alive. He could have helped Tesla with some creative funding ideas...

    • Clever.

      Delorean was a rookie at the fundraising game, though, which is why he turned to an illegal income stream.

      Elon's getting free press, government contracts, and all the lined-up, round the block, VC capitol he wants.

      Edison didn't win the electricity game by producing a better product... he simply understood the way things worked better than Tesla.

      • Re:John DeLorean (Score:5, Insightful)

        by Gravis Zero ( 934156 ) on Monday August 07, 2017 @10:36PM (#54960897)

        Edison didn't win the electricity game by producing a better product... he simply understood the way things worked better than Tesla.

        No, Edison was an asshole who literally electrocuted neighborhood dogs and sued his competition of rudimentary patents because the only thing he cared about was money. Telsa cared about science and the advancement of society rather than profit and allowed companies infringing on his patents to continue, despite holding arguably the most valuable patents in history.

        Telsa wasn't perfect but Edison was a total asshole.

        • by Anonymous Coward
          I agree with everything you said. And that is why Edison is considered a god of "American Innovation" along with the asshole Henry Ford who completely screwed over American industry to pinch a few pennies. Most Americans still don't know how horrible a philips head screw is and that they have Ford to thank for that. And this whole concept of make cheap crap cheaper and more disposable so you can sell it again next year which is drowning America came from him.
          • Re: John DeLorean (Score:3, Interesting)

            by Anonymous Coward

            very little of the blame for the spread of the inferior Philips drive belongs to Ford. By far the blame is on the corrupt legal system in England for burning entrepeneurs with better drives and leading to an unwillingness to scale manufacture of these fasteners to levels necessary for Ford. Clearly Robertson refused to license the design of his drive, it was not that Ford was unwilling to pay, because serious offers were made.

          • by sl3xd ( 111641 )

            Most Americans still don't know how horrible a Philips head screw is

            Every American has had a few choice words with stripping and jumping Phillips screws. Everybody hates them -- just not enough to bother replacing it.

            and that they have Ford to thank for that

            No. There was a better screw of the day - the Robertson, but he wasn't willing to license his patent to the auto industry.

            The Phillips Screw Company was an "IP" company that licensed their patent. The Phillips head was first tested in production on the 1936 Cadillac, and spread like wildfire across the American automotive industry, and from there, into everythi

            • Every American has had a few choice words with stripping and jumping Phillips screws. Everybody hates them -- just not enough to bother replacing it.

              Except that camming out is a feature if putting something together as if you overdrive, it won't break the bit or damage the thing being screwed together. Robinson doesn't strip as easy but it also doesn't cam out and thus, you eventually end up with a lot of broken robinson bits or split boards. While I hear the Robinson wouldn't sell bit with Ford a lot, I've also heard that he chose the Phillips head because it would cam out without damaging the product which is better for manufacturing (and a stripped P

              • by sl3xd ( 111641 )

                Yeah. "Customer issue"

                Granted, it really was useful for the power drivers used in factories back in the day. We have torque limiters on the cheapest electric drivers these days.

                Stripped screws are still a great way to tamper-proof while looking shoddy at the same time.

                • Ya, I know lost of people who swear by Robinson head that I won't argue with, but they're also all mechanical fabricators with good tools who are going to be the ones to have to take apart what they put together.
        • by CrAlt ( 3208 )

          Edison did nothing wrong.

        • Edison didn't win the electricity game by producing a better product... he simply understood the way things worked better than Tesla.

          No, Edison was an asshole who literally electrocuted neighborhood dogs and sued his competition of rudimentary patents because the only thing he cared about was money. Telsa cared about science and the advancement of society rather than profit and allowed companies infringing on his patents to continue, despite holding arguably the most valuable patents in history.

          Telsa wasn't perfect but Edison was a total asshole.

          This probably goes a long way towards explaining why Musk's new automotive release isn't the Edison Model S.

    • Re: (Score:2, Funny)

      by Anonymous Coward

      If only there were some way we could go back to the time that he was alive, and solicit his sage advice.

  • Tesla's gotta be better than mortgage-backed securities, right? And Bernanke/Yellen bought plenty of those.

    • Tesla's gotta be better than mortgage-backed securities, right?

      Mortgages have the real estate as collateral. FNMA securities also have an implicit taxpayer funded backstop.

      • by jeremyp ( 130771 )

        No mortgage backed securities are supposed to have real estate as collateral. In the lead up to the 2008 crash, the whole market was more or less fraudulent.

    • by gl4ss ( 559668 )

      from what you can analyze it really isn't.

      at least mortgage backed securities are _supposed_ to be backed by mortgage.

      these are.. well these are lending money to someone who should already have the money and should be able to get it somewhere else at better terms but somehow is not getting it.

  • by hord ( 5016115 ) <jhord@carbon.cc> on Monday August 07, 2017 @09:15PM (#54960443)

    This is after another press release a few days ago where they stated that Tesla lost 60k pre-orders. That stock could be a hyperloop if manufacturing slips at all.

    • by Rei ( 128717 )

      *sigh*.

      60k cancellations over the course of a year. Meanwhile they've grown to nearly half a million active preorders. And since the launch event they've been netting (new orders minus lost orders) 1800 per day since the launch event. All this with Tesla attempting to anti-sell the Model 3 to preferentially push sales of S and X, since that means short-term cash that can be used to help fund their scaleup.

      • by gl4ss ( 559668 )

        anti sell? that's a new.

        so tell me again why did they repay their another loan in record time and then pursue this presumably more expensive loan?

        anyways, it doesn't really matter until they start talking about actual sales... and production.. ..but the one thing that should matter would be just to try to guess if they can make and sell them at a profit. doesn't matter if it's 101001230120 preorders if they can't meet them at profit.

        the reason why this is sort of interesting is that they're seeking money th

        • by Rei ( 128717 ) on Tuesday August 08, 2017 @06:21AM (#54962977) Homepage

          anti sell? that's a new.

          Only to people who are not paying attention [google.is] is that "a new".

          so tell me again why did they repay their another loan in record time and then pursue this presumably more expensive loan?

          For one, by repaying early they avoided letting the US government cash out on $300m worth of stock options [slate.com]. For two, it deprived people like you of a cudgel to say "See, they're dependent on the government". Not like it stopped you, or not like people like you ever bring that up about companies like Chrysler that never repaid part of their loans.

          You know, by the way, you don't need to ask these things, you can just look them up for yourself.

          the reason why this is sort of interesting is that they're seeking money this way and that is usually not a very good sign for a company like this in a situation like this.

          So you think that stockholders should want to be diluted rather than pay interest, in a company undergoing a rapid expansion? Praytell why?

          it just isn't. it's a sign that the usual lenders/investors have put on a squeeze on how much they are willing to dump money

          Ah, yes, because you can just put $1,5 billion dollars on your credit card.

          if you had been touting ford as an industrial genius in 1901,

          Given that Ford Motor Company wasn't even founded until 1903, that's a stupid comparison.

          In your analogy, 1901 is 2001 (Tesla was founded in 2003). Ford's prototype car Sweepstakes is AC Propulsion's tzero. The equivalent on Ford's timeline to the present is the middle of 1917. And ironically, in 1917 Ford was just starting on the River Rouge complex, the Gigafactory of its day.

          And as for your long "bank" screed, I don't even know which bank you're talking about. Tesla Motors as received investments from numerous sources (including banks) over the years. Tesla's starting capital was provided by Elon Musk and Mark Tarpenning out of their personal assets (Musk's from the sale of Paypal); the Series B funding round added in Valor Equity Partners. Wait a minute, is it Paypal that you're trying to say is a "bank that is not a bank" in your screed?

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      RESERVATIONS. Not pre-orders. People paid for the opportunity to secure a place in line, not for the vehicle itself (although that money CAN be applied to the vehicle if you choose to buy one or fully refunded). It was a masterful coup by Musk, he got a $5B interest-free loan from consumers almost instantly with no penalties assuming they don't go bankrupt, which I doubt they will.

      As for the "60K lost orders", a non-trivial chunk of those were people who got tired of waiting and instead ordered a S or X,

  • by Gravis Zero ( 934156 ) on Monday August 07, 2017 @09:48PM (#54960637)

    Tesla Model 3 in Full Production

    I'm not sure why people are focused on stocks when there is a technology website rather than a business/trader website. I keep reading all this bad-mouthing about Elon's ventures but they have all been panning out albeit a bit delayed. I get the feeling the people writing these articles may have a vested interesting in causing a momentary dip in the stock price because they continue to be wrong time and time again.

    • Elon's ventures ... have all been panning out albeit a bit delayed.

      Money talks. That investors aren't will to accept less than B+ interest rates means a lot more than your personal opinion. If you really think this is a sure thing, then go long on these bonds and get rich. When you cash in, please come back here and post a picture of your new yacht. Good luck.

      • by Rei ( 128717 )

        Meh, it's understandable - bondholders face only the risks, without the long-term benefits. Stockholders have floated Tesla's value to such highs because they're invested in the future of the company, selling millions of cars per year (M3 is being tooled for half a million on its own). Bondholders get none of that, they only get interest. So they take all of the risk with none of the reward (beyond interest). Since the risk is quite real, the interest rates have to be higher to compensate.

        Meanwhile, to Tesl

        • by Whibla ( 210729 )

          I honestly do not fully understand all the Musk / Tesla hate that's been going on recently, particularly on slashdot, however...

          Stockholders have floated Tesla's value to such highs because they're invested in the future of the company

          If memory serves even Elon said fairly recently that he thought Tesla stock was 'overpriced'. (No, sorry I do not have any citation for that, just a vague memory - can't say it troubles me one way or the other)

          Now I generally don't follow share prices but, if my memory is correct, that would explain the rumours of the recent shorts on Tesla's stock. Taking those rumours along with

  • What's the symbol? What's the yield?

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