Tesla has just debuted its Model 3 worldwide, and it now has to grow into an international carmaker. The future of the company relies on the success of this sole project, so there are a lot at stake in this game. Tesla CEO has already admitted on social media that he is feeling overwhelmed by the humungous work the production and delivery departments require. Upon its release, there were at least 500,000 new reservations for Model 3. The company is turning to $1.8 billion debut bond to finish this mission successfully.
Investors Are Still Willing to Trust Tesla Despite Disappointing Cash FLow
This month, Elon Musk’s organization announced a debut bond of $1.5 billion. However, the company changed their target to $1.8 billion in a matter of days. The offering is a private sale with eight-year bonds of 5.25pc. Last week, Musk charmed prospective bond buyers during a meeting in Manhattan for $800 million. The offer included an exclusive tour for investors around the assembly plant of the company.
Through this move, investors showed that they still have great expectations for Tesla despite its negative cash flow. Tesla is also winning at owner satisfaction according to Consumer Reports. On the other hand, the company might end up covering only 5pc for the purchased bonds. Tesla’s notes are unsecured, and investors might not cash in on any upcoming success for Tesla.
The Debut Bond Was Unsecured which Might Put Holders at Greater Risks
In case the electric vehicle company is forced into secured debt due to execution issues, the unsecured holders could lose much of their priority status. They might wind up on one of the lowest levels down the capital structures with fewer chances to be repaid in due time.
Morgan Stanley, Bank of America, Goldman Sachs, Royal Bank of Canada, and others were in charge of the sale for major institutions only. Reports show that at the end of June the company cashed around $3 billion. However, $2 billion has already been redirected to other payments. Nonetheless, Tesla needs more funds to successfully deliver 500,000 Model 3 cars by the end of this year.
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