Tesla’s convertible senior notes settled at the price of 359.87$ are about to expire on March 1st, which means that Tesla company will have to cover that debt since the shares didn’t touch the price of 359.87$ during the entire last week.
The amount of the debt to be paid is set at 920 million dollars, however, on the bright side, Tesla is preparing to expanding their business to Shanghai by opening and building a new factory, while getting ready for Model 3 production as well.
The Debt to Cost Tesla Around the Quarter of the Company’s Cash
In the course of only several days, Tesla will have to repay the debt of nearly 1 billion dollars, which actually represents nearly a quarter of the company’s cash. Tesla shares closed at a price around 100$ below the target price of 359.87$, with the closing price of 297.86$.
If convertible notes worth 920 million dollars, now in debt for Tesla company, reached the targeted value of 359.87$, the convertibles would have been transformed into stocks, bringing profit instead of debts, however, as the expiration date is getting closer, convertibles will be turned in nearly 1 billion dollars debt.
According to Darius Brawn, the former hedge fund manager, Tesla could end up in a financial “crunch” in case Model 3 sales fail to have a major turnout in sales during the following month.
What Brawn further emphasized in his statement is the opinion that Tesla would instead end up in a major trouble if the sales of Model 3 fail the company in March, adding that the fact that Elon Musk, Tesla’s CEO, is having troubles with the Securities and exchange commission is not going in favor of the company, preventing it from raising.
Tesla Expects Positive Net Income in the First Quarter of 2019
Within the fourth quarter report for 2018, the company announced that Tesla has enough cash to support the maturing of convertibles by March, 2019, the company also noted that they expect to see a positive net income for the first quarter of 2019.
Additionally, the company stated that their position has improved by 1.45 billion dollars during the last 6 months of 2018, expecting to see positive cash flow by the end of Q1 in 2019.
Regardless of hopeful prognosis for the first quarter of 2019 coming from the company, the market is already noting that the progress of Tesla is slowing down, at least with capital expenditures going through decreases, which brings the market to a conclusion that the company is not going for any major profit at the moment.
Since the last year, capital expenditures have dropped by -43% despite the fact that Tesla announced new full self-driving features and improvements for Tesla vehicles, which should have consequently raised the capital expenditure, presenting one of the indicators of strain and stress.