Credit rating agency Moody’s has done a deep dive into the massive offering of convertible debt the world’s largest automaker is expected to raise next week. At the center of the offering: Musk’s use of the social media platform to downplay the financial issues afflicting the company, like its cash balance.
The most important figure to focus on, according to Moody’s, is “Musk’s agreement with Tesla’s board of directors that says he ‘may not publish statements with regard to Tesla’s business, operations, financial position, or cash flows that may affect the market price of the Company’s securities.’ The tweets suggest Musk did so on a regular basis.”
Wall Street-watchers expect Tesla to raise up to $2 billion in a private placement of convertible notes. It plans to place a 3 percent debt maturing in five years to investors such as mutual funds and insurance companies and convert it to stock when a specified date comes. The point of that part of the offering was to support its stock price, which is currently above $376. Wall Street’s main gauge of Tesla’s value, the Morgan Stanley price-to-earnings ratio, is around 25.