Tesla (NASADQ:TSLA) Investors Searching for Returns Ignore Risk, Buy Bonds

Tesla (NASADQ:TSLA) Investors Searching for Returns Ignore Risk, Buy Bonds

Tesla (NASADQ:TSLA) Investors Searching for Returns Ignore Risk, Buy Bonds

$TSLA

Tesla Inc. (NASDAQ:TSLA) sold $546-M of auto lease-backed bonds Thursday.

The debt deal allowed Tesla to pare the risk premiums it must pay on the notes. They were sold to yield between 2.3 and 5%.

Investors had at the initial offered prices put in orders for as much as 14X what the EV maker intends to sell on some slices of an ABS (asset-backed security).

Tesla marketed bonds tied to leases of its Model X and Model S vehicles.

It’s the company’s 1st auto ABS deal after flogging issues into the equity, convertible-bond and junk-debt markets.

Tesla offered very attractive yields to to attract bond investors at 2.65 to 5.00%, so they ignored the possibility of the Musk Rentier empire’s flame out.

Tesla has no in-house bank financing for its cars, so this successful offering helps to mitigate a perpetual concern for the company as say it will ramps up production for its Model 3 basic no frills electric car.

So, this is what it boils down to, Tesla can lease a buyer a car (high interest rate) but it cannot sell you one for little or no interest like the big guys can.

I do not see any Musk Magic in that, the bond buyers are looking for yield in a tight market.

Tesla could burn through $4.2-B this year, according to analysts that cover the company. The fledgling EV maker plans to become a regular issuer of auto ABS, according to people familiar with the matter.

Meanwhile, hypmeister Elon Musk is selling Flame Throwers to help finance 2 wild eyed boring projects in the US.

Tesla did not respond to requests for comment.

Symbol Last Trade Date Change Open High Low Volume
NASDAQ:TSLA 352.01 1 February 2018 -2.30 351 359.66 349.42 3,507,923
HeffX-LTN Analysis for TSLA: Overall Short Intermediate Long
Bullish (0.39) Neutral (0.22) Very Bullish (0.60) Bullish (0.35)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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