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Thursday, May 23, 2013

Tesla Pays Back ATVM Loans... But Why?

The big announcement yesterday in the auto business was that Tesla was paying off its ATVM loan off early.

I am puzzled by this, it seems from the outside like a bad business decision.

The ATVM loan was cheap money, carrying an interest rate equal to Treasury notes.  Current 10 year notes are below 2%.

By paying off the ATVM loan early, Tesla traded the cheap government money for stock and a public bond offering of their own notes, also running at about 2% interest. 

But Tesla could have done both--kept the ATVM loan and issued their own bonds--and had extra cash with which to develop the Model X and future less expensive vehicles. 

Was this as simple as Elon Musk not wanting to be under some government oversight, and not wanting to be seen as a government supported enterprise?  

4 comments:

John VonBokel said...

I think it's primarily a publicity move - being able to trumpet the fact that they are no longer "government subsidized", but also the loan from the gov't included warrants to buy Tesla stock @ $7-8 share that would have vested over the course of the loan. Those will now be retired.

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Donald Pittenger said...

Elsewhere on the Internet, I've seen remarks to the effect that Tesla still greatly benefits from government subsidized (tax break) sales incentives. So Musk is still has government involvement, though nothing he can personally eliminate.

Donald Pittenger said...

Elsewhere on the Internet, I've seen remarks to the effect that Tesla still greatly benefits from government subsidized (tax break) sales incentives. So Musk is still has government involvement, though nothing he can personally eliminate.