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Prospectus for the newly issued convertible notes

Discussion in 'TSLA Investor Discussions' started by CapitalistOppressor, May 16, 2013.

  1. CapitalistOppressor

    CapitalistOppressor Active Member

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    #1 CapitalistOppressor, May 16, 2013
    Last edited: May 17, 2013
    Technically they are not yet issued, but this is for future reference.

    http://www.sec.gov/Archives/edgar/data/1318605/000119312513222466/d538784d424b5.htm

    UPDATE:

    This is the most current version, and probably the final version -

    http://www.sec.gov/Archives/edgar/data/1318605/000119312513226108/d538784d424b5.htm

    - - - Updated - - -

    Key section -

     
  2. Lump

    Lump Active Member

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    #2 Lump, May 16, 2013
    Last edited: May 16, 2013
  3. jeff_adams

    jeff_adams Member

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    This makes more sense to me. The first figure seemed too low to erase the DOE loan and still have reserves of cash. Might be better paying off 95% of the loan and keep the restrictions in place to block institutions from buying large chunks of stock. Drive the stock price higher so they can't get too many shares when the DOE loan is paid off.
     
  4. Discoducky

    Discoducky Active Member

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    Higher money yes, but the weight of the loan is quite a burden. How likely would a hostile (because Elon won't sell or be a subsidiary IMHO) takeover be? While the thought of it could drive up stock prices even higher, I do not like the idea one bit. There is no company that could run TM better than they are currently being run (again...IMHO).
     
  5. CapitalistOppressor

    CapitalistOppressor Active Member

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    This looks like the final version, after a couple of interim releases.

    http://www.sec.gov/Archives/edgar/data/1318605/000119312513226108/d538784d424b5.htm

    I'll be honest, I wasn't that familiar with this type of financing. The more I study it the more comfortable I am with it. It's a common form of financing for high growth companies that are also a high credit risk. Tesla is unambiguously in this category.

    The 1.5% annual interest is incredibly attractive. That's an interest cost of ~$2.5m/quarter if the issue is fully subscribed to $660m, with bi-annual payments of ~$5m. The Federal loan cost Tesla $13m to service in the latest quarter.

    If Tesla is even remotely successful it appears likely that these notes will eventually be converted into shares, which will wipe the debt away (while diluting existing shareholders). In the meantime Luvb2b has posted a variety of shenanigans that these notes will make possible, as well as how that might affect the share price in his letter to Elon thread here -

    Dear Elon: How about a capital raise to pay down the DOE loan? - Page 4

    Convertible arbitrage is just the nature of the beast with this kind of financing, and Tesla discusses the risks in the prospectus here -

    - - - Updated - - -

    I don't believe that to be the case. This is an incredibly good deal for Tesla.
     

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