Tesla to Pay $920 Million Bond as Musk Tweet Bars Stock Rise

(Bloomberg) -- Tesla Inc.'s share price was already nowhere near the necessary level to help convert its $920 million in bonds to stock. Elon Musk's contentious tweets killed any last-minute hopes that a miracle rally was near.

His electric-car company is on the hook to settle the March 1 convertible bond maturity in cash, the largest debt payment to date in Tesla's almost 16-year history. To make some of the payout using stock, the shares would have had to reach a volume-weighted average price of $359.87 for the 20-day trading period that began Jan. 29. The figure was about $306.91 as of Tuesday, the final day of that span.

Holders must decide Wednesday if they would rather convert to equity or receive cash, and it's unlikely they'll opt for stock. Based on the trading of Tesla's shares in the last 20 days, if a holder decided to convert their investment to stock, they'd receive a conversion value of $850 between cash and shares, instead of the $1,000 par value at maturity that Tesla would pay out fully in cash.

Tesla had about $3.7 billion of cash and equivalents as of Dec. 31, more than enough to make the principal payment plus another $1.15 million in interest. A representative for Tesla referred to comments in the company's fourth-quarter shareholder letter, which said it had “sufficient cash on hand to comfortably settle in cash our convertible bond that will mature in March 2019.”

Tesla's shares haven't closed above $359.87 since Dec. 14. When reporting fourth-quarter earnings on Jan. 30, the company missed analysts' estimates and said its longtime chief financial officer was resigning. More recently, Tesla's critical Model 3 sedan lost a coveted recommendation from Consumer Reports, and Musk is running into regulatory trouble again because of his tweeting. The stock is down more than 10 percent this year.

The U.S. Securities and Exchange Commission asked a judge on Monday to hold Musk in contempt for violating a settlement that required him to get Tesla's approval before communicating material information to investors. That hasn't stopped him from taking to Twitter again, with his latest posts hinting cryptically that Tesla will have news to share Thursday at 2 p.m. in California.

Should bondholders want to convert, Tesla said it would settle the conversion with a 50-50 split of cash and stock, Bloomberg reported in December.

--With assistance from Dana Hull and Craig Trudell.

To contact the reporter on this story: Molly Smith in New York at msmith604@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Rizal Tupaz

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