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Is there a difference between 'raises' and 'borrows'? I read this as Tesla took investment of $1.8B (presumably in return for shares), but in this case they ha
by d_t_w 9y ago
Is there a difference between 'raises' and 'borrows'?
I read this as Tesla took investment of $1.8B (presumably in return for shares), but in this case they have issued $1.8B of bonds, so they've effectively taken out a loan.
- austenallred 9y ago"Raises" could be a debt or equity event. If you're selling portions of a company (equity) you would call it a "raise" but you're not "borrowing."
- colechristensen 9y agoQuite a few of the "investment" rounds for companies have terms which look like loans more than ownership as well. It can get rather fuzzy distinguishing one from the other.
- Aron 9y agoYeah this was just a loan. The first time for them that it wasn't attached in some way to shares.
- lancewiggs 9y agoNot only that it is unsecured "junk" debt, and the interest rate is incredibly low at 5.3%.
- calafrax 9y ago5.3% is not incredibly low for a corporation borrowing 1.8 billion. it is pretty high which is why investors are jumping on it. This adds $95 million in interest expense per year which is pretty substantial.
- howinator 9y agoIt is incredibly low for bonds in the "junk" trough. For companies with Tesla's credit rating, you're typically looking at 6.5-7.8%. If you're GE, you're of course going to pay a lot less, but GE has a much more robust credit history.