Tesla May Be Circling the Drain

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Thread: Tesla May Be Circling the Drain

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    Tesla May Be Circling the Drain

    Carmageddon Sinks Tesla’s Bonds

    by Wolf Richter • May 20, 2019

    Wolf Street Article

    Tesla is steeped in chaos – and chaos is absolutely the opposite what a complex manufacturing, distribution, and retail operation needs.

    When bonds dive, it’s a bad sign. And Tesla’s bonds dove today to new all-time lows, and the yield spiked to new highs. In August 2017, Tesla sold $1.8 billion in senior unsecured notes due in August 2025, with a coupon rate of 5.3%. The most recent transaction at the moment that I see recorded by FINRA/Morningstar this afternoon was at 82.375 cents on the dollar. This is what these bonds have done in their lifetime:

    Tesla’s shares are volatile and jump up and down. So they’ve been jumping down, down, down, leaving out the ups in between, as some long-term investors finally threw in the towel. They’re down 47% from their 52-week high last December, a big move in five months, when other stocks have rallied in a historic manner. However, at $205 at the moment, they’re still ridiculously overvalued, according to Tesla’s bonds.

    The bonds tell a story of a company that is facing a considerable risk it might default on its debts. If this scenario comes about, it would trigger a restructuring of the company, possibly in bankruptcy court, where creditors would get most or all of the equity, and current shareholders would be mostly or totally wiped out. The bond market is now saying that this risk – the risk that existing shareholders might get wiped out in a restructuring – though still distant, is getting closer.

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    Re: Tesla May Be Circling the Drain

    I would avoid that stock like the plague.

    The analysts that used to come on CNBC and make the case that it was a "technology company" were clearly drunk. It's an electric car company, nothing else. Valuation is still crazy and they will never make money.

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    Re: Tesla May Be Circling the Drain

    Morgan Stanley just slashed their bear case forecast from $97, to $10..

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    Re: Tesla May Be Circling the Drain

    Damn !

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    Re: Tesla May Be Circling the Drain

    Tesla will be available for pennies on the dollar by early 2020

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    Re: Tesla May Be Circling the Drain

    Tesla is a tech company that is proving they are not an auto mfg.

    Tesla did fine when the found a formula with the S model in an unchallenged market. They then moved to the X and then the problems arrived with an overly complicated model. Quality issues and delays were issues.

    The X did not supply the money for the 3 causing delays and they had to fund it with resale offers.

    Now that the 3 is here it is not bringing in the money needed for future products. Add to this more challengers are now entering the market with very big image and names like Porsche.

    Tesla really needed to be a systems development for EV models and sell or license the the systems to MFGs that can not afford to do it themselves.

    Tesla should have done much like Intel an posted stickers on others models with Tesla inside.

    Tesla will be bought out or merge some where with stock taking a hit.

    The money in the EV segment for now is not in entry level models. VW is losing money and I suspect GM is too on th3 Chevy models.

    Cadillac will be a good starting spot and we already know EV is a slow growth segment. It will continue to grow but the rate is limited by technology, cost and infrastructure.

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    Re: Tesla May Be Circling the Drain

    The japanese, koreans or chinese will buy tesla...way before it goes “down the drain”
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    Re: Tesla May Be Circling the Drain

    Quote Originally Posted by JBsZ06 View Post
    The japanese, koreans or chinese will buy tesla...way before it goes “down the drain”
    Getting bought out and "circling the drain" are much the same. Maybe in the sense that there maybe enough value for someone to buy out Tesla says that they are not totally worthless, but at the end of the day Telsa will be gone. So the effect is the same. The longer that Tesla holds out the less value there will be in my opinion. If they hold key patents that other OEM's may find valuable, that is their lifeline to getting bought out and salvaging some dignity. I feel for anyone who bought into the "dream". Those buyers better hope that someone buys out Tesla, or you will see broken Tesla's jacked up on blocks in some very nice neighborhoods.
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    Re: Tesla May Be Circling the Drain

    Quote Originally Posted by JBsZ06 View Post
    The japanese, koreans or chinese will buy tesla...way before it goes “down the drain”
    I don't think so. If you buy a company, you get their debt and Tesla has alot of it. If you wait for bk, then you can buy the assets for a fraction of the cost. Tesla just announced price cuts for the S/X, which seems crazy when they were already losing money. I still would like to know what the price point is when the banks are going to do a margin call on musk. He has like 40% of his shares as collateral for personal loans. If there is a margin call, it is over. He holds so much stock that it would tumble when the banks force the sale.

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    Re: Tesla May Be Circling the Drain

    My guess is Benz will pick ‘em up cheap at some point. Dump the 3. Expand the high end. Use the Supercharger network for their brands.
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    Re: Tesla May Be Circling the Drain

    Quote Originally Posted by Mingo View Post
    Carmageddon Sinks Tesla’s Bonds

    by Wolf Richter • May 20, 2019

    Wolf Street Article

    Tesla is steeped in chaos – and chaos is absolutely the opposite what a complex manufacturing, distribution, and retail operation needs.

    When bonds dive, it’s a bad sign. And Tesla’s bonds dove today to new all-time lows, and the yield spiked to new highs. In August 2017, Tesla sold $1.8 billion in senior unsecured notes due in August 2025, with a coupon rate of 5.3%. The most recent transaction at the moment that I see recorded by FINRA/Morningstar this afternoon was at 82.375 cents on the dollar. This is what these bonds have done in their lifetime:

    Tesla’s shares are volatile and jump up and down. So they’ve been jumping down, down, down, leaving out the ups in between, as some long-term investors finally threw in the towel. They’re down 47% from their 52-week high last December, a big move in five months, when other stocks have rallied in a historic manner. However, at $205 at the moment, they’re still ridiculously overvalued, according to Tesla’s bonds.

    The bonds tell a story of a company that is facing a considerable risk it might default on its debts. If this scenario comes about, it would trigger a restructuring of the company, possibly in bankruptcy court, where creditors would get most or all of the equity, and current shareholders would be mostly or totally wiped out. The bond market is now saying that this risk – the risk that existing shareholders might get wiped out in a restructuring – though still distant, is getting closer.
    Tesla days are numbered. Way too many problems!!!

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    Re: Tesla May Be Circling the Drain

    Quote Originally Posted by dannyg View Post
    My guess is Benz will pick ‘em up cheap at some point. Dump the 3. Expand the high end. Use the Supercharger network for their brands.
    I'm thinking Toyota.
    They're going very little with EV's. Well, why do your own when you can pick up Tesla's pieces for pennies on the dollar?
    They used to own the factory, too.
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    Re: Tesla May Be Circling the Drain

    or FCA, didn't they partner up so they make the emissions line?

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    Re: Tesla May Be Circling the Drain

    Quote Originally Posted by Mingo View Post
    Tesla will be available for pennies on the dollar by early 2020
    They'll be snatched up before then.

    Quote Originally Posted by JBsZ06 View Post
    The japanese, koreans or chinese will buy tesla...way before it goes “down the drain”
    Yep, only need to buy a controlling amount of stock. I doubt politically the Chinese will be allowed to buy it.

    Quote Originally Posted by dannyg View Post
    My guess is Benz will pick ‘em up cheap at some point. Dump the 3. Expand the high end. Use the Supercharger network for their brands.
    Quote Originally Posted by eaton53 View Post
    I'm thinking Toyota.
    They're going very little with EV's. Well, why do your own when you can pick up Tesla's pieces for pennies on the dollar?
    They used to own the factory, too.
    Both Benz + Toyota used to own stock in Tesla - and sold it a few years ago. They sold high, they could buy low, though Merc is coming out with their own E lineup as we speak, so I don't know that they really need them. They may want Gigafactory, though.
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    Re: Tesla May Be Circling the Drain

    Tesla will not be bought. Even if you pay 0 for the shares, you assume the 23B in liabilities. Only a BK will let a buyer scoop up assets without those liabilities.

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