A billion debt of Tesla has coming to be due in March 1, 2019 and if the company’s stock price failed to improve till the due date then about a third of the company’s cash would be wiped out paying off the same.
Tesla has $920 million of convertible debt due in March and that convert has a strike price of $359.87 per share. The cash which company was holding at the end of most recent quarter was $2.97 billion.
If the company’s share succeeded to trade above $359.87 on the first day of the March, then its debt of $920 million will be converted into equity shares, in case of otherwise company has to settle the debt in cash. However, in past weeks, Tesla’s stock remained traded below that mark and closed at $302.26 on Friday with a nosedive of 12.97 percent due to an announcement of company cutting off 7 percent of its jobs in a bid to maintain profitability.
The bondholder would be paid out in a 50-50 mix, as notified the company to bondholders previously. Means that bondholders will get fifty percent amount in cash and reaming fifty percent of their bond amount will be paid in shape of common share of the company’s stock. But that still be applicable with the price of stock to gain the value of above $360 before bond maturity date, else company will have no other option left but to pay them in all cash.
Tesla was intending to honor the original maturation date as Musk revealed during the company’s third quarter earnings call. At the time he also added that in order to reduce the company’s debt load and overall leverage of the company, it was dropping the option of refinance and going to avail the pay off option by paying them off.
Tesla is expected to be announcing its Q4 results on Feb 6.