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
      Tony Belding
      • 6 Months Ago
      I have to quibble over "competition from some very large companies". Can they name one? I've been rather surprised by the failure of any other car maker to even hint at plans for a product that can compete directly with the Model S.
      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
        • 1 Day 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
          • 1 Day 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
          • 1 Day 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.
      jthomas35712
      • 6 Months Ago
      I think this new "Ryden Dual Carbon battery" made by "Power Japan Plus" sounds REALLY good. I think Tesla should HIGHLY consider using this battery chemistry in their cars as soon as possible. This battery will do everything that today's lithium ion batteries can do ... only a LOT better. For starters, they are much CHEAPER ... they are made out of cheap carbon with no rare materials. They are safer, very durable/long lasting, they charge up 20 TIMES FASTER, have UP TO 300 MILES OF RANGE, NO EXPENSIVE COOLING SYSTEMS ARE NEEDED, they more powerful, etc. This sure sounds like the REVOLUTIONARY battery breakthrough that everyone has been hoping for. Google this ... "Dual Carbon batteries: Is this finally the breakthrough we’ve been promised for so long?"
      LA is Best
      • 6 Months Ago
      Hey, NO PROBLEM, The government will bail Tesla out with your tax dollars because they have a friend in oBOMBa!!
      BipDBo
      • 6 Months Ago
      I doubt the major risk is a possible default. Maybe people with a lot more business education and experience than this lowly engineer disagree, but I'd say that Tesla is pretty grounded here to stay. I think the biggest issue is that the stock price is way to high for its potential to deliver dividends. Even if they do as well and accomplish everything Elon has proposed in his proposed timeframe (which is possible), it's dividends will still be lower than the stock's value demands.
      Technoir
      • 6 Months Ago
      S&P was just downgraded to "senseless bunch of trolls" status.
      YONATAN
      • 1 Day Ago
      SENATOR JOHN BOEHNER IS A SAD EXCUSE FOR A POLITICIAN AND A HUMAN BEING IF EVER THERE WAS. HE HAS SINGLE HANDEDLY DESTROYED THE LIVES OF MILLIONS OF UNEMPLOYED FAMILIES WITHOUT UNEMPLOYMENT EXTENSON BENEFITS SINCE LATE LAST DECEMBER. HE HAS USED HIS POWER IN OFFICE TO DELAY AND POSTPONE THE EXTENSION VOTE IN THE SENATE UNTIL IT BECAME TOO LATE TO PASS IT IN TIME. THIS WAS AN INTENTIONAL MOVE ON HIS PART AND OF THOSE REPUBLICANS THAT FOLLOW HIS EXAMPLE. SINCE LAST DECEMBER, MILLIONS HAVE FACED EVICTIONS, HOME FORECLOSURES, BANKRUPTCY, AND HOMELESSNESS, WITH EVERY PASSING MONTH THAT WENT BY WITHOUT THE BILL. EVEN THOUGH A FOREIGN AID BILL WAS PASSED DURING THIS TIME, FOR THE UKRAINE, WORTH BILLIONS OF TAX PAYER'S DOLLARS, NO HELP WAS GIVEN TO THESE UNFORTUNATE AMERICANS WITHOUT BENEFITS. THE REPUBLICANS HAVE CLEARLY SHOWN FOR WHOM THEY WORK FOR, AND FOR WHOM THEY SERVE... AND IT'S NOT YOU OR ME. THE REPUBLICANS WORK FOR SPECIAL INTEREST GROUPS AND CORPORATE AMERICA ONLY. MANY FAMILIES ARE STILL STRUGGLING AND FAILING FINANCIALLY DUE TO THE EXTENSION BILL NOT BEING PASSED. THIS IS TRULY A CRIME AGAINST THE POOR AND UNEMPLOYED IN OUR COUNTRY, AND I HOPE THAT EVERYONE AFFECTED WILL VOTE THEM ALL OUT OF OFFICE IN THE COMING ELECTIONS.
      CoolWaters
      • 1 Day 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?
      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
      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.
      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.
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