Tesla Stock Slumps After “Terrible Bond” New Issue Tanks

Tesla stock prices has almost erased all of its post-earnings gains as the company's recently issued $1.8 billion junk bond is tumbling

TSLA stocks is giving back its post-record-cash-burn gains


As the newly issued junk bonds are suddenly coming face to face with this ugliness…


As MarketWatch reports, the 5.3% notes due 2025 are now trading as high as 5.75% yield (with the risk spread blowing out from 330 to around 370bps)

AllianceBernstein’s Distenfeld said investors are still starving for income in a low-interest rate, low-yielding world, and said it is important to be patient — and disciplined — in this market.

“Tesla was an aggressive deal for a company that is not expected to be cash-flow positive for years,” said Gershon Distenfeld, head of credit at asset manager AllianceBernstein.


 “At just over 5%, it is not a great risk return,” he said.


“There are companies coming to market that shouldn’t be issuing at all, so you have to watch out,” he said.


“The same is happening in the bank loan market, people are afraid of rising rates and enamored of floating-rate debt, so underwriting quality is changing.”

This seemed to sum things up perfectly though…

“Anyone who looks at a lot of high-yield bonds would expect more robust protection against future debt,” Valerie Potenza, head of high-yield research at Xtract Research, a sister company of Debtwire, told MarketWatch ahead of the sale.


“We think it’s a terrible bond, but people seem blinded by the Tesla story.”


Blinded indeed…

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