Tesla given £25million boost from George Soros as £8billion debt concern mounts | City & Business | Finance
According to filings with the US Securities and Exchange Commission, Soros Fund Management LLC took a £25.9 million ($35 million) stake in the convertible bonds of Tesla, which are due in March 2019.
Convertible bonds are a way to invest in a firm’s debt that matures into a predetermined chunk of Tesla’s equity. For Tesla it remains a cheap way to raise money against the rising value of its business, for Mr Soros it is an effective way to buy into one of the world’s most talked about firms.
After months of negative headlines over stuttering production of its cars, the news that Mr Soros has returned to Tesla, after selling off all his stock last year, comes as a welcome boost.
Elon Musk, who like Mr Soros is a billionaire, found himself in hot water earlier this month when his eccentric behaviour wiped £1.48 billion ($2 billion) from Tesla’s value.
Responding to questions over its cash flow problems and the production of its game-changing Model 3 car, the controversial CEO launched a staggering attack on “bonehead” analysts daring to question the firm’s performance during a briefing.
Mr Musk interrupted a question on the firm’s capital requirements with “Excuse me, excuse me. Next, next. Boring bonehead questions are not cool. Next.”
When another analyst asked him about the problems facing production of the highly-anticipated and reasonably priced Model 3 electric car, there was a long pause, followed by, “We’re going to go to YouTube. Sorry, these questions are so dry. They’re killing me.”
Following the outburst, Christian Stadler of Warwick Business School, told Express.co.uk that, “if Tesla carries on the way it is going it will not survive, I think investors are right to be worried.
“On the one hand I think Tesla would have broken down long ago if it wasn’t for Elon Musk driving this great excitement around the brand.
“But investors are getting more and more worried, the hype is starting to wear off for them and Tesla needs to find solutions quickly.”
Stuttering production is not Tesla’s only problem. The debt mountain is rising and Dennis Davitt, partner at Harvest Volatility Management told CNBC today that there are concerns over how this massive burden is cleared.
He said: ”The issue around Tesla is it does have a lot of debt.
“We’re seeing interest rates go higher. Then they need to service that debt at higher rates. That could have a much bigger impact on earnings.”
Tesla has over £7.8billion ($10 billion) in long-term debt on its balance sheet and has not posted a quarterly profit since the third quarter of 2016.
Tesla’s future very much depends on the affordable Model 3 that was set to thrust the firm into the mainstream of the motor industry.
However, Tesla’s ambitious new project has a long way to go before the company will return to the green. Mr Musk has the difficult task of reversing the staggering £16,612 ($22,584) pre-tax loss per vehicle being swallowed by the Silicon Valley firm.
The Model 3 starts at £25,700 ($35,000) but with options can easily cost more than £36,800 ($50,000) – a £11.84 ($16k) loss on each vehicle.
Express.co.uk has approached Tesla for comment.