Can you share your thoughts on the bond pricing?
I specifically keep an eye on
Bond Factsheet - TSLA 5.300% 15Aug2025 Corp (USD) || bondsupermart as a metric for solvency guidance. The recent drop has me less confident than I used to be.
Yeah, so beyond the possibility that they know something we don't know, I think it's due to the following main factors:
- Corporate bond traders tend to be pretty risk averse, conservative guys, to whom the following news are serious red flags:
- Elon taking a puff of weed (and they don't notice how inexperienced Elon was, and how he explained that he doesn't smoke weed),
- Elon being portrayed by the NYT as a mental wreck in tears, on the verge of collapse, (and they don't watch YouTube so haven't seen the video of a happy Elon in Fremont on the same day the NYT conducted an interview without publishing as much as a transcript),
- Elon referring to bankwuptcy several times in the recent past (and they don't know that he has done this countless times already, it's a motivator for him)
- New CAO leaving a month into the job, during which Elon wanted to go private and then decided not to.
- Elon tweeting in anger, etc.
- Current Q3 analyst estimates are still negative and don't show Tesla making cash
- Also to them bankwuptcy is the #1 risk Boogeyman they don't normally hedge against.
While most Wall Street hedge fund managers would shrug off the above (they've probably done worse ...) and concentrate on the fundamentals, bond traders not so much, it's extremely outside their normal cultural comfort zone of polished corporate high finance.
So basically peak FUD and viscous character attacks against Elon convinced another category of conservative investors to turn bearish.
If Tesla starts generating cash in Q3 and Q4 then it probably won't matter: Tesla won't need financing. Moody's could downgrade Tesla to below toilet paper and it probably wouldn't matter: Tesla raised $680m of local capital in China recently for the Chinese Gigafactory, via local loans only that create no corporate liability for Tesla shareholders, no equity financing was required and no new corporate bonds were issued either.
Note that bond prices reacted strongest to similar incidents in the past as well, and recovered big time not on Q2 financials primarily, but on Elon's performance during the Q2 conference call: composed, deferential to analysts, conservative. Their kind of guy.
We even had bond prices of $94 right after the CC I think - and the fundamentals are even better today:
the Model 3 was the top grossing car in the U.S. in August, with record sales and still over $10b in pre-orders.
So yeah, I think there's a high likelihood that the 2025 bonds are mispriced, due to Elon being Elon and FUD.
If Q3 numbers beat estimates and meet guidance then I fully expect a perfect CC call from Elon again, which should bring bonds above $90+ again.
Not advice, of course.
(But I have the ads blocked anyhow.)
