Tesla Stock Slumps After "Terrible Bond" New Issue Tanks

Tesla stock prices has almost erased all of its post-earnings gains as the company's recently issued $1.8 billion junk bond is tumbling...

TSLA stocks is giving back its post-record-cash-burn gains...

 

As the newly issued junk bonds are suddenly coming face to face with this ugliness...

 

As MarketWatch reports, the 5.3% notes due 2025 are now trading as high as 5.75% yield (with the risk spread blowing out from 330 to around 370bps)

AllianceBernstein’s Distenfeld said investors are still starving for income in a low-interest rate, low-yielding world, and said it is important to be patient -- and disciplined -- in this market.

“Tesla was an aggressive deal for a company that is not expected to be cash-flow positive for years,” said Gershon Distenfeld, head of credit at asset manager AllianceBernstein.

 

 “At just over 5%, it is not a great risk return,” he said.

 

“There are companies coming to market that shouldn’t be issuing at all, so you have to watch out,” he said.

 

“The same is happening in the bank loan market, people are afraid of rising rates and enamored of floating-rate debt, so underwriting quality is changing.”

This seemed to sum things up perfectly though...

“Anyone who looks at a lot of high-yield bonds would expect more robust protection against future debt,” Valerie Potenza, head of high-yield research at Xtract Research, a sister company of Debtwire, told MarketWatch ahead of the sale.

 

“We think it’s a terrible bond, but people seem blinded by the Tesla story.”

 

Blinded indeed...

Comments

jcaz mtl4 Mon, 08/21/2017 - 13:24 Permalink

LOL- there were some big money guys touting this deal pretty hard-  two weeks later, they're finally waking up.  Unsecured, only a 5% coupon, and the money raised is spitting into the wind for Tesla-  real Par is prolly around 50,  good lucking holding this piece of shit on your books for the next 15 years, whoops.....

In reply to by mtl4

FringeImaginigs jcaz Mon, 08/21/2017 - 14:41 Permalink

LOL That's funny. You really think that the big money guys touting this deal are now just waking up.  The touts are touts because they knew the deal sucked. Thats why they were touting it. That's what it means to be a tout. The touts are as touts always were.  Meanwhilte, the suckers are those that bought the deal. Maybe a few of them are just starting to get the message, maybe not.  But they will all get the message long before the bonds mature. 

In reply to by jcaz

hound dog vigilante Ben A Drill Mon, 08/21/2017 - 13:34 Permalink

 electric can be clean, but if batteries are involved then it's absolutely dirty... battery tech is the weak/dirty constant in the renewable energy equation. every serious gov't & military in the world has spent big budget & brains on the battery tech plateau and all have come back w/ nothing... add Musk to that list. TSLA is a glorified golf cart. 

In reply to by Ben A Drill

abgary1 Mon, 08/21/2017 - 13:58 Permalink

Tesla only makes sense if you believe in the false premise of global warming and sustainability of government subsidizes.In other words, this is a perfect investment for the leftwing progressive idiots who have more money than brains.

83_vf_1100_c Mon, 08/21/2017 - 14:27 Permalink

I was listening to a car talk guy on AM a few days ago. He was taking about the inability of Tesla to supply spare parts for the model S now. He stated when the commoners model 3 hits the market in much larger #s and the spare parts system locks up they are going to have serious public relations probs. The rich have 6 cars in the garage and their S being down for parts 6 - 12 months makes for nice party talk. Joe 6pack's 3 being down means he can't get to work. Then there is the 500k cars they are supposed to produce in 2018 model year. Not happening. Best estimates are they might kivk out 100k this year and 400k folks who reserved one may be waiting 3 yrs for it. This assumes Tesla is in biz 3 yrs from now.  The model 3 is aptly named. Buy it today and drive it 3 yrs from now. Tesla ain't gonna make it. You want an electric car it will be Jap or Chinese.  My carbed 62 v8 Fairlane looks better everyday.

Milton Keynes Dickweed Wang Mon, 08/21/2017 - 17:16 Permalink

for a day or two, maybe a week. The Refineries need lots of grid power, thetransporters need GPS. Nobody is running zip without Internet, PCs, smart tablets... You have an EMP and we are back to 1920's...With little margin. You want to run a refinery, where do the workers sleep after hours?Who feeds them? Where are their families?  What about doctors? All that secondary stuff is grid connected. Sure, NeckBeardo may have his redoubt with 500 gallons of 87 octant. Okay...  Then what.

In reply to by Dickweed Wang

not dead yet 83_vf_1100_c Tue, 08/22/2017 - 04:49 Permalink

Supposedly until at least November any 3 built will have the longer range battery raising the price to $44,000. Another site claimed those cars will also be sold with the upgraded interior, the standard is really cheap, for another 5 grand bringing the total to $49,000. Looks like those wanting a 35 grand Model 3 will be pushed to the back of the line even if they got in early. More cancellations on the way. I would like to see proof of Musk's claim that Tesla is getting 1,800 orders a day for the 3.

In reply to by 83_vf_1100_c