Abstract

The case study discusses how Tesla, Inc. with a below investment-grade rating successfully issued convertible bonds one after another since 2013 and funded its electric cars business at a relatively low interest rate. However, over the period, things changed. Tesla’s stock price saw incredible growth, and this, it was felt, could end the era of convertible bonds at Tesla. Now, the CEO of the Tesla has to look at another low-cost long-term source of financing to fund the company’s business.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand convertible bonds and other similar financial instruments
• Understand the difference between bonds and debentures
• Understand the advantages and disadvantages of convertible bonds as a long-term source of financing
• Explore various sources of funding available to startup companies

Keywords

Convertible bondholders; Convertible bonds; Tesla; Incredible growth in Tesla’s stock price; Credit rating; Debentures; Long-term source of financing; Various types of bonds; Advantages and disadvantages of convertible bonds