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$920M Bond Payment Looms for Tesla

This article was originally published on ETFTrends.com.

In four weeks, Tesla has a $920 million payment in bonds to make as pressures mount for CEO Elon Musk amid a 7 percent reduction in the electric carmaker's workforce.

ETFs to watch with the heaviest weightings in Tesla include the VanEck Vectors Global Alt Energy ETF (GEX) , ARK Industrial Innovation ETF (ARKQ) and the First Trust NASDAQ Cln Edge GrnEngyETF (QCLN) .

In its 15-year history, Tesla has only been profitable for three quarters. In Q3 2018, Tesla made a profit of $312 million (about 4%), but capital expenditures were near the $2 billion level.

The bond payment also comes amidst Musk's plans to create a $35,000 Model 3 vehicle. With about $2 billion in cash according to a September 30 government filing, the company also holds about $9.8 billion in total liabilities and assets of $7.9 billion.

“The need for a lower priced variants of Model 3 becomes even greater on July 1, when the U.S. tax credit again drops in half, making our car $1,875 more expensive, and again at the end of the year when it goes away entirely,” Musk said in the memo.

It puts the electric carmaker in a tenuous position as it delves deeper into 2019.

"The whole Tesla story boils down to the number of Model 3s sold and gross margins," Gene Munster of investment firm Loup Ventures told Business Insider in October. "If you create a situation where the cash flow goes from negative to positive you can start servicing the debt."

$920M Bond Payment Looms for Tesla

Major Rally Needed for Tesla

The $920 million bond payment due on March 1 includes convertible debt, so if the company' stock is trading at or above $359.88, Tesla has the option to pay back the debt with stock as opposed to cash. The price of Tesla now currently stands at just under $300--$296.45 as of 2:15 p.m. ET--this would mean that the stock must rally over 21 percent in the next month.

“The current operating plan is to pay off our debts and not to refinance them, but to pay them off and reduce the debt load and overall leverage of the company,” said Musk during an earnings call in October 2018.

Tesla's tenuous financial situation was certainly on the minds of Saudi Arabia's Public Investment Fund, which hedged its 4.9 percent stake in the company. 

“To the best of my knowledge, there has been no communication with PIF for months,” said Musk said in an email to the Financial Times. “I thought they had probably sold their shares. We don’t know if they own any at all.”

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