While Tesla Motors' Model S is a piece of pristine, well-designed metal, the company's bonds have now been rated as "junk." But maybe that's better than the other way around. We'll let the investors decide.

Standard & Poor's gave Tesla's bonds a 'B-' rating this week, indicating so-called "junk status," Automotive News says. That means investors are saying the company has a relatively high chance of defaulting on its loans. S&P cites Tesla's short history, competition from some very large companies and relatively narrow product line (none of which are new facts), and estimates that investors would be able to recover 30 to 50 cents on the dollar should the company default.

Tesla has been issuing billions of dollars in bonds this year to raise funds for its planned gigafactory somewhere in the southwestern US, a project that Tesla estimated will cost $5 billion ($2 billion from Tesla, $3 billion from partners). Tesla said earlier this month that it took a first-quarter loss of $49.8 million, compared to year-earlier net income of $11.2 million. While revenue rose 10 percent to $620.5 million, selling and administrative costs more than doubled while research and development costs jumped 48 percent. And while Tesla's share price has doubled during the past 12 months (it's at around $209 today), the company's liabilities doubled to $3.52 billion from the beginning of the year to the end of the first quarter. There's a short video on the situation from CNN Money below.



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  • 243 Comments
      purrpullberra
      • 6 Months Ago
      Well, I don't know a lot about the bond rating world but I've learned a lot from reading the opinions of a lot of folks who do know it. And I've learned that these folks at S&P are charlatans. 1.They utterly missed predicting ALL important economic developments in the last decade or more. 2.They deserve a lot of the blame for valuing all garbage mortgages as A+ investments. 3.Many people in the know believe them to be CRIMINALLY LIABLE for a lot of what happened due to
        Edge
        • 2 Days Ago
        @purrpullberra
        Yeah but your main criticism against them is that they did not asses risk properly, by giving investments above grade ratings, but here they are pointing out the risks, and you criticize them. Tesla is a sure thing to you? You have all your money invested there?
          Joeviocoe
          • 2 Days Ago
          @Edge
          S&P and Moody's were not simply "under assessing risk" in 2008. They were essentially handing out higher risks because of who paid them to give favorable ratings. A guess Tesla didn't pay.
          Joeviocoe
          • 2 Days Ago
          @Edge
          S&P and Moody's were not simply "under assessing risk" in 2008. They were essentially handing out higher risks because of who paid them to give favorable ratings. A guess Tesla didn't pay.
      Joeviocoe
      • 6 Months Ago
      http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0k7AQ0W1X2c "April 14 (Bloomberg) -- Standard & Poor’s and Moody’s Investors Service defended their compensation structures amid criticism from regulators that being paid by investment banks to assign credit ratings creates a conflict of interest." It is already known that "unsolicited ratings" are generally much lower than solicited ratings. And I know that TSLA Shorts are floating very high as of late
      CoolWaters
      • 6 Months Ago
      Seems to be a rule here, the more right wing the CEO, the more Incompetent. At least in terms of innovation.
      CoolWaters
      • 6 Months Ago
      Seems to be a rule here, the more right wing the CEO, the more Incompetent. At least in terms of innovation.
      CoolWaters
      • 6 Months Ago
      Seems to be a rule here, the more right wing the CEO, the more Incompetent. At least in terms of innovation.
      CoolWaters
      • 2 Days Ago
      They "saw" the housing bubble, they chose to ignore it. The housing bubble grew for years, so many years, that it was impossible to short. At that point they thought it would go on forever. Grossly Incompetent Judgement. If you think the government had the funds to inflate housing you're sorely misinformed. Wall Street Leverage Alone had the funds to inflate the market, not only that but they created their own small businesses to train their own Home Inspectors to also inflate the value of homes, so they could see inflated overpriced homes into junk MBS's, Mortgage Backed Securities, which they sold as AAA investments to the world. Lesson for Edge. Always read a book on a subject. Never listen to Right Wing Bull, it's always corporate funded propaganda to protect the criminal. Right wing bull is a DE-Education. A good book on this subject is: Bailout Nation, by Ritholtz.
      Joeviocoe
      • 2 Days Ago
      --"They certainly were not the 'cause' of the housing crises. " They were one of the BIG causes. There were many contributing factors... but the ratings system is so corrupt, it is a "Systemic Problem".
      Joeviocoe
      • 2 Days Ago
      --"They certainly were not the 'cause' of the housing crises. " They were one of the BIG causes. There were many contributing factors... but the ratings system is so corrupt, it is a "Systemic Problem".
      CoolWaters
      • 2 Days Ago
      They "saw" the housing bubble, they chose to ignore it. The housing bubble grew for years, so many years, that it was impossible to short. At that point they thought it would go on forever. Grossly Incompetent Judgement. So, what's different?
      CoolWaters
      • 2 Days Ago
      They "saw" the housing bubble, they chose to ignore it. The housing bubble grew for years, so many years, that it was impossible to short. At that point they thought it would go on forever. Grossly Incompetent Judgement. So, what's different?
      Marco Polo
      • 2 Days Ago
      @ Actionable Mango Yes, sadly your observation is accurate. I think the bugs have driven away some of the most informative contributors, like Letstakeawalk, Dave Mart, Ezee, 2WM, and many others.
      Weapon
      • 6 Months Ago
      Dropped to? Tesla did not have any rating in the first place so how could they drop? Realistically speaking, this is an unsolicited rating which means the S&P has no background or inside information on Tesla. Which makes this rating pretty much worthless. That said, even if they did have inside info, that didn't help much when they rated AIG and Lehman Brothers as AAA prior to bankruptcy.
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