Wednesday, March 21, 2018

Tale of the Tape: "Tesla's debt price is deteriorating" (TSLA)

For the equity, as noted way back on December 1st:

$300 Looks Like an Important Line For Tesla's Stock (TSLA)
It's not that $300 is some magical round number, rather looking at the chart if the stock moves decisively through that line there is a lot of air down to the $240 base where the run began.
TSLA Tesla, Inc. daily Stock Chart 

That one day dip below the line on February 9th, $294.76 low print, almost got us to pull the trigger on a (very) rare Tesla short but the recovery started so fast, actually that very day, $310.42 close, that we were saved from our own lightning fast reflexes.
Or something.

From FT Alphaville;
Let's examine Tesla's $1.8bn unsecured bond, which reached a near all-time high yield of 6.57 per cent this week.

Should stock market investors care?

A rule of thumb on Wall Street is that corporate bond investors are the 'smart money' - able to identify distress at companies long before the equity traders catch on.
Bondholders' sole concern is the preservation of their original investment, and the interest payments they are due.

So even a small upward move in the yield of a corporate bond can signify potential problems with a company and their expected cash flows.

Issued at par with a yield of 5.30 per cent in August, the bond's price has been grinding downwards since, its yield going in the opposite direction: 
Quill Cloud

And by request, the spread:
Quill Cloud
Tesla's bond yield is trading 366 basis points above the 7-year Treasury note. It isn't the highest the spread has ever been, but is a lot more than fellow cash-guzzling market superstar Netflix's 2025 unsecured bond, which is trading 202 basis points above its benchmark, according to Bloomberg....MUCH MORE