Tesla’s (NASDAQ:TSLA) share price was nowhere near the necessary mark to help convert its $920-M in bonds to stock even before CEO Elon Musk’s recent incendiary Tweets.
And so Mr. Musk’s contentious Tweets killed any last-minute hopes that a miracle rally is in the offing.
His struggling EV company is on the hook to settle the 1 March convertible bond maturity in cash, the largest debt payment to date in Tesla’s almost 16-year history.
To make some of the payout using stock, the shares would have had to reach a volume-weighted average price of $359.87 for the 20-day trading period that began on 29 January. The figure was about $306.91 as of Tuesday, the final day of that span.
Holders must decide Wednesday (today) if they would rather convert to equity or receive cash, and it’s unlikely they will opt for stock.
Based on the trading of Tesla’s shares in the last 20 days, if a holder decided to convert their investment to stock, they’d receive a conversion value of $850 between cash and shares, instead of the $1,000 par value at maturity that Tesla would pay out fully in cash.
Tesla had about $3.7-B of cash and cash equivalents as of 31 December more than enough to make the principal payment plus another $1.15-M in interest.
A representative for Tesla referred to comments in the company’s Q-4 shareholder letter, which said it had “sufficient cash on hand to comfortably settle in cash our convertible bond that will mature in March 2019.”
Tesla’s shares have not closed above $359.87 since 14 December.
When reporting Q-4 earnings on 30 January, the company missed analysts’ estimates and said its longtime CFO was resigning. More recently, Tesla’s mass market M-3 sedan lost a coveted recommendation from Consumer Reports, and Mr. Musk is running into regulatory trouble again because of his Tweeting. The stock is down nearly 10% YTD.
The Securities and Exchange Commission (SEC) asked a judge Monday to hold Musk in contempt for violating a settlement that required him to get Tesla’s approval before communicating material information to investors. That didn’t stop him from taking to Twitter again last night, hinting that Tesla will have news to share Thursday at 2:00p in California.
Should bondholders want to convert, Tesla said it would settle the conversion with a 50/50 split of cash and stock