Convertible note issue

[guyrelax]

Hi

I purchased these bonds in early 2019, bond 88160RAG6 expiring 2024. I have initiated conversion of the bond. I was told by Etrade that it would take 3 business days. It's now been 2 weeks and I still haven't received anything. Etrade just called me and said they have learned that it could take up to 20 days (initially they told me 3-5 days. They are clueless) and Tesla has the right to issue shares, cash, or a mix of the two.

I'm wondering if anyone has experience with this bond conversion and if what I'm being told is true. I would be quite upset if I receive anything but shares since that could trigger tax liability and my intention was to hold long term. Etrade also couldn't tell me what stock or bond price the conversion would be based on. I was under the impression I would simply receive shares equal to the number of bonds purchased multiplied by the conversion rate of 3.2276.

Since the conversion request 2 weeks ago the bonds have been gone from my account. Now just this morning the bonds are back in my account... no shares, no cash. The same bonds. I am leaning towards etrade simply did everything wrong. Waiting for a callback Monday

If anyone has any insight on this it would be appreciated. thanks!

 

[ggr]

Hi

I purchased these bonds in early 2019, bond 88160RAG6 expiring 2024. I have initiated conversion of the bond. I was told by Etrade that it would take 3 business days. It's now been 2 weeks and I still haven't received anything. Etrade just called me and said they have learned that it could take up to 20 days (initially they told me 3-5 days. They are clueless) and Tesla has the right to issue shares, cash, or a mix of the two.

I'm wondering if anyone has experience with this bond conversion and if what I'm being told is true. I would be quite upset if I receive anything but shares since that could trigger tax liability and my intention was to hold long term. Etrade also couldn't tell me what stock or bond price the conversion would be based on. I was under the impression I would simply receive shares equal to the number of bonds purchased multiplied by the conversion rate of 3.2276.

Since the conversion request 2 weeks ago the bonds have been gone from my account. Now just this morning the bonds are back in my account... no shares, no cash. The same bonds. I am leaning towards etrade simply did everything wrong. Waiting for a callback Monday

If anyone has any insight on this it would be appreciated. thanks!

The issue date of those bonds (I have some too) was 5/7/2019. I wouldn't call that "early 2019", but hey.

They only became convertible on Wednesday. I posted about it in the main thread. This was because the criteria for early conversion had only just been met, and a hat tip to @Boomer19 for digging up that clause in the prospectus. If you applied 2 weeks ago, you actually had no right, at that time, to convert. So ETrade screwed up by even trying to convert them, and now you have them back, no difference to your financial position. What's your problem?

Now that the conditions have been met, you have until late June to convert them. Go for it. I chose not to convert mine, contrary to what I said in my posting.

 

[guyrelax]

my fault, i just checked and indeed I purchased in May. I am not sure what you mean by the criteria for early conversion had only just been met. I thought anyone could convert after the stock hit 309. First stock or bond I have ever bought, so thus all the questions. Also after speaking with etrade, I don't actually have the bonds in my account.. I'm not sure what I do have but they are still working on the conversion. My problem with etrade is they either give different answers to every question or just shrug their shoulders. They are clueless

 

[ggr]

my fault, i just checked and indeed I purchased in May. I am not sure what you mean by the criteria for early conversion had only just been met. I thought anyone could convert after the stock hit 309. First stock or bond I have ever bought, so thus all the questions. Also after speaking with etrade, I don't actually have the bonds in my account.. I'm not sure what I do have but they are still working on the conversion. My problem with etrade is they either give different answers to every question or just shrug their shoulders. They are clueless

I agree with pretty much everything you say here, especially about ETrade.

For the conversion, see this post by @Boomer19 in the main thread. Here's most of it:

convertibles may have pre-defined periods “windows” where holders can convert - or it my be up to the company, agent, brokers, i’m not really sure which. so that would explain why there’s no news.

the sec documentation should state so. if i have a chance i’ll look it up and try to find it. i just can’t remember off hand. but it’s an interesting point

for part B
yes, you’re swapping the $10,000 you paid for 10 bonds for $10,000 worth in shares of tesla at a deep discount to current market price $30x.xx. the terms state tesla can dictate cash, stock. or mixed. but etrade i clearly telling you that you can convert for shares. which i can’t imagine taking any other choice but shares right now anyway.

for the interest.
you’ll get pro-rated accrued interest for the part of the year you held your converts. you shouldn’t miss out on the whole year of AI


excerpt from prospectus - 424B5
Holders may convert their notes at their option at any time prior to the close of business on the business day immediately preceding February 15, 2024 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2019 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the notes on each trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined below) per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after February 15, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time. Upon conversion of notes, we will deliver cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, as described in this prospectus supplement.

The conversion rate with respect to the notes will initially be 3.2276 shares of common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $309.83 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, we will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event in certain circumstances.

 

[guyrelax]

Thanks. honestly pretty lost on the conditions and also what share price they would convert to cash at. I have 70 bonds. Really just want shares, which I believe is 226.

 

[ggr]

Thanks. honestly pretty lost on the conditions and also what share price they would convert to cash at. I have 70 bonds. Really just want shares, which I believe is 226.

Each $1000 bond converts to about 3.22 shares at a conversion price of $309.xx.

 

[guyrelax]

Yes I get that part. But I don't understand the conditions as to when conversion is possible and why when I converted on 4/17 it was not ok. I understood it as, as long as its above $309, I can convert and I get 226 shares. But if I get cash or a mix, at what share price is the cash? And will I have tax liability for the cash?