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No, the company has been operating in the red forever. He is bowing to the public markets to make the company's life easier. It was never going to die if he kep

No, the company has been operating in the red forever. He is bowing to the public markets to make the company's life easier. It was never going to die if he kept these employees.

rdgthree 8y ago
Wow, this is huge information. Can you link your source?
btilly 8y ago
Those same public markets were recently trading at 87-88 cents on the dollar. (See http://markets.businessinsider.com/bonds/tesla_incdl-notes_201717-25_regs-bond-2025-usu8810laa18 http://markets.businessinsider.com/bonds/tesla_incdl-notes_2... for verification.) If the markets were assuming that they would recover half of what was owed in bankruptcy, that corresponds to about 1/4 odds of bankruptcy in the next few years. Given that historically markets have been more accurate than any individual commenter, the risk of bankruptcy was quite real. No matter how many Monday morning quarterbacks like you think otherwise.
- stevievee 8y ago
  Sorry, to clarify I am talking equity. Please provide examples now. The snark in this thread is unbelievable.
  - btilly 8y ago
    Here is a quick explanation of how markets work, and why equity is the wrong thing to look at to answer the question asked. Equity prices give you a share in future success. They therefore predict expected future value, pro-rated by the odds of getting there. Bonds give you back money if the company remains in business, and nothing more. Therefore they represent a prediction of odds of going out of business, with no regard to how wonderful the possible upside in the company might be. Tesla's combination of high equity value and low bond value represents a company that has a real chance of becoming dominant in its sector, and also a good chance of cratering instead. You shouldn't invest in a company like that unless you understand why there is a real risk, and are willing to take it.

No, the company has been operating in the red forever. He is bowing to the public markets to make the company's life easier. It was never going to die if he kept these employees.

rdgthree 8y ago

Wow, this is huge information. Can you link your source?

btilly 8y ago

Those same public markets were recently trading at 87-88 cents on the dollar. (See http://markets.businessinsider.com/bonds/tesla_incdl-notes_201717-25_regs-bond-2025-usu8810laa18 http://markets.businessinsider.com/bonds/tesla_incdl-notes_2... for verification.) If the markets were assuming that they would recover half of what was owed in bankruptcy, that corresponds to about 1/4 odds of bankruptcy in the next few years. Given that historically markets have been more accurate than any individual commenter, the risk of bankruptcy was quite real. No matter how many Monday morning quarterbacks like you think otherwise.

stevievee 8y ago
Sorry, to clarify I am talking equity. Please provide examples now. The snark in this thread is unbelievable.
- btilly 8y ago
  Here is a quick explanation of how markets work, and why equity is the wrong thing to look at to answer the question asked. Equity prices give you a share in future success. They therefore predict expected future value, pro-rated by the odds of getting there. Bonds give you back money if the company remains in business, and nothing more. Therefore they represent a prediction of odds of going out of business, with no regard to how wonderful the possible upside in the company might be. Tesla's combination of high equity value and low bond value represents a company that has a real chance of becoming dominant in its sector, and also a good chance of cratering instead. You shouldn't invest in a company like that unless you understand why there is a real risk, and are willing to take it.