Investors Are Beginning To Realize Tesla Is Standing On Shaky Ground

Tesla CEO Elon Musk

Wall Street investors are growing weary of Tesla as the electric vehicle maker’s bond prices have tumbled since the company issued a massive bond sale in July to finance production on the Model 3.

Tesla’s bond prices fell 2 percent Monday as investors start having second thoughts about the health of the Silicon Valley company’s finances. The automaker debut in the junk-bond market in early August, which is typically relegated for companies with poor credit.

The price stumble suggests the bond buy might have further tarnished Tesla’s already battered financial image. Tesla hopes the Model 3, which debuted at the end of July, becomes a trendsetting and profitable vehicle capable of justifying the debt sell.

But some investors are not impressed – many Wall Street insiders questioned the wisdom of dumping more money into a company that has yet to churn out a profit.

“God love them, they took advantage of a super strong market to get super low financing,” Jack Flaherty, a bond portfolio manager at GAM Holdings AG, told reporters Monday, referring to the up-and-coming electric vehicle market. His group did not buy the deal.

Tesla’s competitors have had ample time to ratchet up their campaign against the Elon Musk-led automaker. Audi argues that its 2018 A8, for instance, will include Level 3 autonomy, allowing drivers to safely move down the highway without paying attention to the road conditions.

There are also serious questions as to whether the Model 3’s base model will have the same range as the similarly priced Chevy Bolt, which has the capacity to run more than 238 miles before needing a charge. Tesla claimed last year that the Model 3 would run more than 215 miles per charge.

Tesla’s bond has dropped to 97.75 cents on the dollar in recent trading, forcing the yield up to 5.65 percent, according to data from MarketAxess. Bond yields rise when prices fall and fall when prices increase. Investors have taken advantage of the rock-bottom yields, but the continued price fall does not portend good things for a company that has not earned a profit.

“It’s more attractive now, but it’s not a level I’m willing to step into yet,” Flaherty said.

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Comments (7)

  • Avatar

    Sonnyhill

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    Time will tell. No mention of what it costs per mile to operate a Tesla, regardless of subsidies. Rich advocates probably have ordered theirs. Consumers will wait.
    Tech stocks are risky. How many people want a Model 3? Wanting and buying are two different things. “Go Pro” makes an excellent product but sales have slowed. Everybody that wants one has one.

    Reply

  • Avatar

    G

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    Teslas are cool cars, but can they compete in a fair and open marketplace? Can they exist without corporate welfare?

    Only one way to find out?… Take off the training wheels and compete on merit alone. I doubt that Elon Musk has the stuff. If so, show us.

    Reply

  • Avatar

    Moose

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    E-cars are inherently dangerous due to the batteries. There’s no telling when the thing will burst into flames by itself. It has happened several times now.
    Any collision, how small, will be able to set the thing on fire. No stopping that.

    Reply

    • Avatar

      Sonnyhill

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      The next Pinto?
      Lithium batteries caught fire in the Boeing Dream Liner and Formula 1 cars without the collision part.

      Reply

  • Avatar

    Al Shelton

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    Where I live in north -central Alberta we get winters that are very cold[and probably getting colder].
    If I have a Tesla and it is fully charged, how far can I drive when it is -40C?
    Heated seats; front and rear window defoggers; mirror defoggers; and in-car heaters; all draw a lot of power.
    I may make it to the shopping mall and back… ;^D

    Reply

  • Avatar

    Sonnyhill

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    How long does it take to recharge a Tesla?
    How long does it take to pump gasoline?

    Reply

  • Avatar

    Steve

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    I have come to realise thegreen m,ovement is not about saving the planet, but rather crashing economies to destroy our civilisation.
    In Australia, communist State govts are quickly killing off coal generation capacity to artificially drive up electricity prices to make super-expensive renewables look “cheap”.
    As generating capacity dives and electric cars get mandated, it doesnt take a genius to know that charging a car at home doubles your household power needs, and the grid will collapse under the weight of extra load ( useless electric shopping trollies called EVs.)
    Its all being cleverly set up – the grid is run down, load is increased = it all goes bang.

    EVs need to be resisted at every turn – they are just a tool to collapse our grid and therefore collapse our economy.

    In OZ we have South Australia which is an economic and power basket case, followed closely by Victora, both run by “leaders” who are widely disliked and seem to want to drive their states to use 42% renewables but delivberately ignoring it cant be done if you want a viable economy…..

    Then Musk turns up in collapsing South Australia and sells them a battery that will supply 6% of their energy needs but its only good for one hour.

    Its truly breathtaking….roll on Climate Nuremberg Trials….

    Reply

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