What Does Tesla's Delay of Bond Issue Mean for its Stock?

When you think about the impact of raging inflation on electric-vehicle maker Tesla  (TSLA) – Get Tesla Inc Report, it’s natural to think about the prices of its autos. The 7.9% surge in consumer inflation for the 12 months ended in February pushed Tesla to raise its car prices recently.

But another effect of rising inflation — and the turmoil created by the Russia-Ukraine war — has emerged tor Tesla. It has delayed a $1 billion-plus sale of bonds backed by  its vehicle leases, thanks to volatility in the bond market, knowledgeable sources told Bloomberg.

Bond yields have surged recently, with the 10-year Treasury yield rising 35 basis points in the last 10 days, to 2.16%.

While $1 billion of bonds sounds like a lot, it’s really not that big a deal for Tesla, Barron’s notes. As of Dec. 31, Tesla had $18 billion of cash. And it’s seen producing more than $15 billion of cash flow this year, excluding capital spending. That would top last year’s total of $12 billion.

This may explain why the bond news seems to be having little impact on Tesla’s stock, perhaps your biggest concern. The company’s shares dipped 0.63% in recent trading, not far from the 0.60% decline for the Nasdaq Composite index.

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Tesla has executed seven asset-backed bond packages in the last four years, Bloomberg reports. Despite the company’s “limited experience” in this area, the bonds have done well, according to Fitch Ratings analysts.

In other Tesla news, a recent lawsuit claims that the company’s driver assist system, Autopilot, constantly monitors drivers, violating their privacy rights.

Autopilot uses eight cameras around the vehicle to gather a full 360-degree view, facilitating the technology that allows the car to navigate through traffic hands-free.

However, in May 2021 Tesla released a driver monitoring system software update that turned on a cabin-facing camera already built into its vehicles that would detect the attention of a driver while autopilot was in use.

This monitoring is a violation of the Illinois Biometric Privacy Act, according to a class action lawsuit filed March 10. 

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