The consequences of Elon Musk’s latest Twitter fiasco may range further than merely Musk having to answer to the SEC, which is seeking to hold him in contempt of court. On top of potentially violating his settlement with the SEC, the pressure put on Tesla stock as a result of the embattled CEO’s latest meltdown all but assures that Tesla will have to fork over $920 million in cash to handle a March 1 convertible debt maturity, as the company’s stock remains below the bond’s VWAP conversion price of $359.87.
Bondholders have until Wednesday to figure out if they want to convert to equity or receive cash, according to Bloomberg which notes that it is “unlikely” that they will opt for equity. Converting to equity would result in about 85% of the par value Tesla would pay out in cash, making it an easy decision for creditors.
The company reported that it had $3.7 billion in cash at the end of 2018 and while that is more than enough to make the payment, skeptical eyes continue to watch the company’s cash position closely. To assuage investor fears, at the end of Q4, Tesla said it had “sufficient cash on hand to comfortably settle in cash our convertible bond that will mature in March 2019.” Tesla also said it would settle the conversion with a 50-50 split of cash and stock for any bondholders who wanted to convert.
One semi-wild card also remains. Early Wednesday morning, Musk – who is being pursued by the SEC for his actions on Twitter and who simply just can’t seem to help himself – tweeted out that there would be a Tesla-related news announcement coming on Thursday at 2PM.
Despite the fact that an “announcement of an announcement” could in and of itself be considered material, Twitter sleuths were quick to point out that Tesla stock responded almost immediately to Musk’s late night announcement that “some Tesla news” would be coming on Thursday.
The market responded. His tweet came in the wee hours of the morning
At 4:00:04AM, the ECNs took out the best offer
45 minutes later, the machines bid $TSLA over $300. (best bid @ last session was 297.76)
By 6AM, $TSLA was bid over $301
Before 7am, $TSLA was printing over $303 https://t.co/HDzCZK4cjf
— SheepleAnalytics (@SheepleAnalytic) February 27, 2019
This announcement could literally be thought of as the “last hour” before Tesla has to meet its bond obligation.
Does “teflon” Elon have another trick up his sleeve, or will he now have to fight two charges of contempt to court as a result of what some see as a thinly veiled if desperate attempt to talk up the price in the 11th hour?