Tesla Gets Unsolicited S&P Junk Rating on ‘Niche’ Position (zz)# Stock
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By Matt Robinson May 27, 2014 3:30 PM PT
Tesla Motors Inc. (TSLA), the electric-car company whose stock climbed
fourfold last year, was slapped with a junk credit rating by Standard & Poor
’s because of “considerable uncertainty” about its long-term prospects.
The unsolicited B- ranking, six levels below investment grade, reflects a
business “constrained by Tesla’s niche and independent market position,”
S&P, the world’s largest credit-rating company, said today in a statement.
Palo Alto, California-based Tesla has a smaller scale relative to peers, a
narrower product focus, and limited demand for its products, said S&P, which
said its outlook on the rating is “stable.”
The youngest publicly traded U.S. automaker has tapped debt markets without
a ranking from any of the major ratings companies, according to data
compiled by Bloomberg. Tesla, headed by billionaire Elon Musk, raised about
$2.3 billion in March selling convertible debt to fund a battery factory to
make more affordable models.
“We believe there is considerable uncertainty in Tesla’s long-term
prospects,” S&P analysts Nishit Madlani, Dan Picciotto and Joseph Lin wrote
in the report. Compared with larger, more established automakers, the
company is less likely “to successfully adapt to competitive and
technological displacement risks over the medium to long term,” they said.
The rating was “developed independently by their analysts without any
feedback from Tesla on our growth plans,’ Liz Jarvis-Shean, a spokeswoman
for the carmaker, wrote in an e-mailed statement.
The gains in Tesla shares slowed this year after the company reported first
quarter Model S sales this month that fell below top-of-the-range analyst
estimates.
Shares have risen 41 percent this year to $211.56.
Tesla Motors Inc. (TSLA), the electric-car company whose stock climbed
fourfold last year, was slapped with a junk credit rating by Standard & Poor
’s because of “considerable uncertainty” about its long-term prospects.
The unsolicited B- ranking, six levels below investment grade, reflects a
business “constrained by Tesla’s niche and independent market position,”
S&P, the world’s largest credit-rating company, said today in a statement.
Palo Alto, California-based Tesla has a smaller scale relative to peers, a
narrower product focus, and limited demand for its products, said S&P, which
said its outlook on the rating is “stable.”
The youngest publicly traded U.S. automaker has tapped debt markets without
a ranking from any of the major ratings companies, according to data
compiled by Bloomberg. Tesla, headed by billionaire Elon Musk, raised about
$2.3 billion in March selling convertible debt to fund a battery factory to
make more affordable models.
“We believe there is considerable uncertainty in Tesla’s long-term
prospects,” S&P analysts Nishit Madlani, Dan Picciotto and Joseph Lin wrote
in the report. Compared with larger, more established automakers, the
company is less likely “to successfully adapt to competitive and
technological displacement risks over the medium to long term,” they said.
The rating was “developed independently by their analysts without any
feedback from Tesla on our growth plans,’ Liz Jarvis-Shean, a spokeswoman
for the carmaker, wrote in an e-mailed statement.
The gains in Tesla shares slowed this year after the company reported first
quarter Model S sales this month that fell below top-of-the-range analyst
estimates.
Shares have risen 41 percent this year to $211.56.
