Per http://ir.tesla.com/static-files/6db4f56e-1532-4cd6-b8dc-3ff... they have $230 million due in Nov 2018, $920 million due in March 2019, $560 million due in Nov 2019, $113 million due in Dec 2020, $1,380 million due March 2021, and $977.5 million due in March 2022. Plus coupons on all of these payable regularly between now and then.
By my count this totals $4.1805 billion. They claim to currently have $3 billion in cash and cash equivalents on hand. But there are various outstanding liabilities.
Given a GAAP profit in the $300 million+ range this quarter, and a projected European market twice the size of the American one, this may all be doable. But it is still a balancing act.
Elon will have to roll over the debt somehow: either into stock offerings or maybe into new bonds. The meager profits reported this quarter aren't anywhere near the amount they need to pay off those debts... even if the profits grow 2x or 3x larger in Q4 and Q1-2019.
But, paying off some of those debts will put the company into a stronger position.
The Tesla bonds in question have a coupon of 5.3% and were sold into one of the lowest interest rate environments in history. They currently have an 8.5% yield. Rolling debt over on those terms is not fun.
Financial theory and reality tend to agree except in a crisis. Unfortunately crises do tend to come along periodically. How TSLA weathers the next one will be interesting to see.
From Wikipedia "The basic theorem states that in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the value of a firm is unaffected by how that firm is financed". See anything wrong with this picture?
"These results might seem irrelevant (after all, none of the conditions are met in the real world), but the theorem is still taught and studied because it tells something very important. That is, capital structure matters precisely because one or more of these assumptions is violated."
There must be some special case here.
Who would loan money to Tesla below the rate they could get in risk free t-bills?
This is the bond in question. https://markets.businessinsider.com/bonds/tesla_inc-bond-202...
Furthermore, it was sold below par value. There's 1.25% coupon, but the overall yield is closer to 5% IIRC.
Yes, it is possible that in March Tesla could be trading around over 20% above what it was most of today, but it would be unwise to depend on it.
If its a mandatory convertible, then Tesla pays it off in shares proportional to the value assuming Tesla was $360ish in price. So you "can't lose", you'll get 33% more stocks if TSLA was only $270 to ensure the bond-holder doesn't lose money.
I haven't been able to verify the status of the March 2019 convertible however. But just note that mandatory convertible vs non-mandatory is a big detail.
First because articles like http://www.latimes.com/business/la-fi-musk-convertible-bonds... indicate that they are not. And also because the potential dilution indicated in the Tesla statement that I linked to shows zero dilution if the stock prices is not sufficient for them to convert.
But realizing the huge financial consequences for the company of having the stock price high does shed light on why Elon is so eager to push his stock price up. He would much rather pay in stock than cash.
Incidentally the LA Times article indicates that there is a lot more debt than just the issues I listed. That's a list of all of Tesla's convertible debt. But not all of it is convertible...
> $1.2B increase in payables
That's a yearly increase. $500M-ish increase between Q2 -> Q3. I think its reasonable to expect payables to go up as they ramp up from 2000 M3/week to 4000 M3/week, but the number still gives me worry.
I think you're right to worry about these numbers. But its important to worry about the CORRECT numbers.