Tesla, Inc., the Palo Alto-based automotive and energy company is set to make a large debt repayment. Tesla has had a chaotic past few months. Even though Year-End figures show that it has scaled up production dramatically, it has laid-off 7% of its workforce.
The Company has senior convertible notes worth $920 Million that will retire on 1st March 2019. The conversion rate of these notes is 357.97 per share. Its share prices are nowhere near the required level to convert $920 Million to stock. And, Elon Musk’s controversial tweets haven’t been helping him. As of now, Tesla’s shares are worth $314.75 per share.
Shareholders must decide whether to convert to equity or receive cash. It is unlikely that they will take stock as, based on the treading of the past 20 days, if they choose to convert to stock, they’ll receive $850 as compared to the $1000 value at maturity that Tesla will payout in cash.
Referring to comments in the company’s fourth-quarter shareholder letter, a Tesla representative said that it had “sufficient cash on hand to comfortably settle in cash our convertible bond that will mature in March 2019.” When reporting fourth quarter earnings on 30 January, missed analysis of estimates led to its longtime CFO resigning. Moreover, the Model 3 failed to get a recommendation by Consumer Reports due to flaws. All of this has led to the stock being down more than 10% in 2019.
According to a December report, Tesla plans to use a mix of stock and cash to pay-off the debt. The dept repayment will be a big hit to the entire Electric Vehicles industry as a whole.