Apparently, Tesla needs desperately for the stock price to be over $360
Why $360
Why is $360 the magical level? That’s the conversion price for $920 million of convertible debt due on March 1, 2019 (indenture). If the stock price does not cross $360, the company will have to repay bondholders with cash instead of shares. A quick glance at the balance sheet would tell us that the company could afford this payment at present as the company had $$2.24 billion in cash at the end of Q2. However, we must also take future capital investments and the ongoing operational cash burn into account.
The company decreased its 2018 capex guidance in Q2 to under $2.5 billion. Having spent $1.27 billion thus far, the company would likely have to spend another $1.2 billion in 2018. That leaves ~$1 billion cash on the balance sheet at the end of the year before any incremental capital investment (more on this later) or any cash outflow from operations. If we stop there, perhaps the $920 million bond won’t be a big concern, but can you trust the management’s promise about becoming cash flow positive?
Both Musk and the CFO have assured investors that the company will be cash flow positive in the coming quarters, and even claimed that they will be paying off the $920 million with “internally generated cash flow,” implying that Tesla could actually make $920 million over the next several months.
