
How Elon Musk might make $920M in Tesla debt go away - chollida1
https://www.latimes.com/business/autos/la-fi-hy-tesla-convertible-bonds-20181115-story.html
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rcMgD2BwE72F
>If conditions are met, and all bondholders convert, Tesla would suddenly gain
$920 million worth of much-needed financial flexibility. To spark a
conversion, Tesla needs to boost its stock price to $359.87 or higher at some
point in the three-month period between Dec. 1 and Feb. 28. The higher the
price goes, the more likely holders will convert.

Funny, the strike price ($359.87) is already below the current stock price
(360.47)

>(Under the bond agreement, Tesla can choose to pay the bonds off in cash,
rather than exchange debt for stock. But given its cash needs, that’s highly
unlikely.)

Elon already said he intends to paid back the debt with cash rather than
convert. They confirmed on the last earning call that they plan to pay back
all debt with cash flow, and ramp up to 500K Model 3 per year with minimal
spending (i.e no more cap raise).

If this happens – while the competitors start facing troubles switching to
electric, with plummeting profit margins, their market cap will reach a point
where they can buy out a competitor. I bet they'd start by acquiring Panasonic
cell manufacturing activities though, to further accelerate their tech lead.
Remember that they own 60+% of global car battery production today, and their
share continues to rise as they ramp up Model 3 (only 1/3 of the 1rst
Gigafactory capacity is built yet, and the Shanghai plant is already under
construction). Now, wait for the production of Model Y, the Semi and their
upcoming Megapowerpack…

Tesla's market cap has surpassed BMW and Daimler in the past two weeks.
Someday, Wall Street will recognize that Tesla is the first (and only?)
company to have crossed the chasm to all-electric, and maybe even realize that
Tesla owns a big part of the renewable energy business thanks to multiyear
technological advance and multi-industry economies of scale.

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sulam
Where is this cash coming from?

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toomuchtodo
> Tesla reported a $312 million profit for the three months that ended Sept.
> 30, thanks to a surge in production and sales of its Model 3 sedan. The
> company has long promised that the model would help make electric vehicles
> and Tesla itself a mass-market phenomenon.

> Tesla ended September with $3 billion in cash compared with $2.2 billion at
> the end of the previous quarter. The company generated $881 million in free
> cash flow — cash produced through operations less capital expenditures. “The
> cash-flow number is impressive,” said David Whiston, an auto analyst at
> Morningstar. “That’s a lot of cash for a company their size.”

Disclaimer: I own a Tesla and a chunk of TSLA stock.

[https://www.nytimes.com/2018/10/24/business/tesla-third-
quar...](https://www.nytimes.com/2018/10/24/business/tesla-third-quarter-
earnings.html)

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softbuilder
Tl;dr - that debt is in convertible bonds and if the stock goes up a few bucks
most holders will presumably opt to convert to owning Tesla stock.

Doesn't that just dilute the stock?

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rtkwe
Only if they have to issue new stock to cover the conversion. I imagine the
company has these shares in reserve.

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bryanlarsen
"Outstanding shares" in the definition of earnings per share et al only count
shares held by shareholders, not shares held in the treasury. So it is
dilution whether the shares came from a reserve or new issuance.

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mnw21cam
Web site blocked.

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traderjane
I use Firefox with ad-blockers and it worked just fine for me.

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danso
The LATimes (formerly of Tribune) and other Tribune-media properties block EU
traffic because of GDPR: [https://digiday.com/media/u-s-sites-continue-block-
european-...](https://digiday.com/media/u-s-sites-continue-block-european-
visitors-post-gdpr/)

