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


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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