Tesla recently made the financial news again by halting a more than $1 billion offering of bonds that were backed by leases on its EVs. This made Tesla the third issuer to halt a sale in the midst of a bit of market turbulence, Bloomberg reported. Rich Smith shared his thoughts about this while pointing out that Tesla didn’t really need to issue those bonds anyway.
In a blog post for The Motley Fool, Smith noted that Tesla halting the bond sale meant that it won’t be able to get access to all $1 billon of the expected funds being raised. However, this is proving to be a smart move for Tesla since it won’t be surprised by the high-interest rates that it would have to pay on those bonds. Smith also pointed out that it doesn’t really need the cash from these bonds right now anyway. He wrote:
“According to the latest data from S&P Global Market Intelligence, Tesla’s balance sheet boasts $17.7 billion in cash against only $8.9 billion in debt. And with strong free cash flows of $3.5 billion generated over the past year, the company really isn’t hurting for cash at all. Tesla’s entirely capable of self-financing.
“Maybe the real story here really isn’t the obvious headline: ‘Tesla had to suspend its bond offering.’ Maybe the real story is that Tesla’s balance sheet is so rock solid that it didn’t need to issue bonds in the first place — and that’s the good news that is driving Tesla stock higher.”
Tesla shareholders who actually care about the company and invested in it for the long run know this, and perhaps this is why Tesla keeps doing better than expected despite the so-called “bad news.”
That’s our take, anyway — what’s yours? Head on down to the comments section at the bottom of the page and let us know if this “bad news” changes the way you look at Tesla’s stock prices.
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