Moody's
Hopefully by now you have read the transcript linked in the OP. If so, you understand the depth that these people will go to. You understand that analyst reports are circulated before they come out for them to front run. You understand the rating agencies are mentioned by name. But you also have to understand, Fairfax Financial was a relative unknown midsize firm from Canada. Tesla's short interest is the
largest in the entire US stock market. What is at stake now is profoundly greater, what about the methods? Of course I can't know that for sure. But what we do know:
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After the close on 3/27, Moody's downgraded Tesla's debt to B3, senior notes to Caa1, with outlook negative.
Before this happened, during the trading session on 3/27 Tesla was down $25 on double the average volume. In the prior 11 trading days, Tesla was down 10. Note that the stock market as a whole was also down during this period, but not to this extent and especially less so on 3/27.
The rationale behind Moody's downgrade:
Tesla's ratings reflect the significant shortfall in the production rate of the company's Model 3 electric vehicle. The company also faces liquidity pressures due to its large negative free cash flow and the pending maturities of convertible bonds ($230 million in November 2018 and $920 million in March 2019). Tesla produced only 2,425 Model 3s during the fourth quarter of 2017; it is currently targeting a weekly production rate of 2,500 by the end of March, and 5,000 per week by the end of June. This compares with the company's year-earlier production expectations of 5,000 per week by the end of 2017 and 10,000 by the end of 2018.
The negative outlook reflects the likelihood that Tesla will have to undertake a large, near-term capital raise in order to refund maturing obligations and avoid a liquidity short-fall. Prospects for addressing its liquidity requirements (whether equity, convertible notes or debt) will be supported if the company can establish credibility for reaching Model 3 production levels -- 2,500 per week by the end of March, and 5,000 per week by the end of June.
So the crux of the downgrade and especially the negative outlook revolved around the uncertainty of Tesla's production rate. It was stated that this could be alleviated if Tesla could hit its production targets by the end of March.
Those precise production targets were set to be updated the very next week. Moody's could have waited less than one week to confirm their projections in order to make a more informed judgment, yet for some reason they did not, and was determined to get this downgrade out.
The fallout after Moody's downgrade:
Tesla bond price plummeted to 87 cents on the dollar, while yields approached 8%. Just a few short months before this, Tesla sold these bonds paying 5.3%. At these new prohibitive rates, Tesla was essentially shut out of the debt markets. This was happening precisely during Tesla's cash "valley" before Model 3 ramps up. There was talk of a liquidity crisis, while JP Morgan started peddling Tesla "crash puts" below $100.
JPMorgan Recommends Tesla ‘Crash Puts’ With Tail Risk Rising
I did not have a position in Tesla at this time, and I did not yet read the excerpt in the OP. I am not sure if my reaction would have changed much if I had. I consider myself a conservative bull, and after reading this news I became more cautious on Tesla than ever before. I understood that nothing has changed with Tesla the company, but there are many things outside of Tesla's control. Markets create a narrative and it takes on a life of it's own, especially when it comes to liquidity issues.
It becomes a self-fulfilling prophecy*. These were my own words of warning to a fellow TMC user through private message before I had read The Divide, so I understood too well when I finally came upon it.
*will expand on this*