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Investors will have a very long weekend to reflect on the consequences of Tesla's decision (TSLA) to reduce its full-time workforce by 7%.
While Wall Street applauded Tesla's third quarter results – which were well above consensus estimates – investors were not happy that the fourth quarter is likely to be lower than the previous quarter's mark, according to e-mail. on the scale of society.
Although Tesla could get much worse results than a drop in profits – for example, no profit – Wall Street was not impressed. The move raises a lot of questions at this stage. Does Tesla reduce its workforce to pay for its Shanghai factory? What does it mean for his model 3 of $ 35,000?
Of course, it is useful to have a context and in this case, we do not have much. For example, while Tesla is preparing to deliver Model 3 in Europe and China, are there any explainable costs or reasons for a possible slowdown? Will these explanations point back to the next quarter?
These are the types of responses investors will want when Tesla holds its quarterly teleconference and will release its fourth quarter results.
The impact on bonds
Despite the many questions and the badault of the sale on Friday, a note deserving to cover the 2019 convertible bonds of his Tesla. On March 1, a convertible debt of $ 920 million will mature. If Tesla shares are trading at $ 359.88 or more, the company may choose to repay this debt with shares rather than cash.
Tesla has already said that if the stock were to close above the conversion price, he would repay it with a 50/50 combination of cash and stock. However, with Tesla's recent pullback and Friday's 13% drop, Tesla's strategy is jeopardized.
In the last quarter, Tesla had about $ 2.9 billion in cash and equivalents. Tesla's liquidity and liquidity situation is more complicated than just a quick look at the balance sheet, but it gives us a rough idea of the manufacturer's position. In the third quarter, Tesla posted positive and profitable cash flows. As long as it is in the fourth quarter, Tesla should be able to make the payment in March, even if it is only cash. However, Tesla will arrive at an unfortunate time as it tries to open its Shanghai factory before the end of the year, continues to expand its Supercharger network and has several new models.
Of course, it is still possible that Tesla shares will be able to rally above this conversion price in time to pay some of the debt with shares. After all, there is only one month left and we have witnessed more crazy things than a 20% rise in Tesla 's stock price in a short time. Gains will probably be an important catalyst here too.
Either way, keep the debt in mind.
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