1/ It was announced last week Tesla was planning to repay its 2019 convert with a mix of cash and stock, leading to much discussion on the Twitter, with questions centering on the signaling: is it bullish or bearish? Good question. But, other questions might be better.
2/ Corporate finance 101 says that debt is cheaper than equity, so why not just replace the maturing convert with another? If the capital markets are truly open to you, why spend any amount of valuable cash on debt maturities?
3/ I know Tesla’s credit spreads have widened (blown out actually) and debt would cost more in absolute terms, but the stock is also up $100 points from its last convert issue, and the company is telegraphing blue skies ahead. So again, why not just tap the convert markets?
4/ Why not just go to the existing convert holders and get them to roll? Existing holders are already short shares and will just adjust delta’s at the margin. Converts are cheap capital. You need capital. Cash is capital. Why not roll them and keep the cash in the business?
5/ You’ve just spent $230mm on the Nov ’18 convert, now you’re spending another $450mm to retire the 19’s. That’s $700mm, or probably 70% of the cost of a new manufacturing line. You need new manufacturing lines. Why waste the cash?
6/ As bad as Tesla’s balance sheet is (it’s bad), w/ an $80 bil market cap, the market is saying absolute debt levels don’t matter with this name. If that is truly the case, just replace the convert with another, stretch out your maturities and theoretically improve liquidity.
7/ Perhaps the convert holders are skeptical of the company’s valuation and see little upside in any equity option at this point, which again is interesting given the $80 bil market cap and a stock near ATH’s.
8/ So now the company will transfer shares into the hands of holders that don’t really want them, or aren’t in the business of holding them long term. So you’re diluting existing holders and giving shares to probable sellers. How does that shore up your cap table?
9/ The two obvious questions are: (1) does this company have a sentient CFO?; and, (2) are the capital markets really open to them?
10/ Whatever delusion Musk is operating under now, he must know he has chronically underspent on capex while needing to spend billions more to reach growth targets. If he doesn’t know this, he is among the most irresponsible CEO’s in history.
11/ This “we don’t need cash” false bravado might play well with idiot fanboy base and dopes like Leslie Stahl and Phil Lebeau, but when you throw up tents and skimp on paint, among other notable shortcuts, you’re kind of telegraphing the jig is up with respect to capital.
12/ We have posted the company’s equity capital raising history before. 7 deals in 7 years, including the IPO, ranging in size from $150mm to $2.0bn. The $2.0bn raise was 5/18/16 during peak M3 frenzy, after another miracle profit quarter and when Fidelity owned 24mm shares. 
13/ The shareholder base is thinner now, and the stock is $150 higher than when the ’16 raise was floated. There has been much speculating about whether this scamming fraudster is being blocked from raising by some regulatory hurdle.
14/ We note he was in possession of a subpoena in 2017 but floated securities regardless (without disclosing that minor detail). Maybe it’s worse than a regulatory roadblock. Maybe it’s simply his bankers and the market telling him they are not buying the sham performance now.
Companies that have access to markets (i.e., buyers not named Baron and Anderson) roll securities whenever they can. When markets are truly open to you, maturity dates mean nothing.
