Investors in Tesla Inc (NASDAQ:TSLA) shares received some encouraging information on the bond market. The status of the company’s debt has been upgraded from “junk” to “investment grade.”
S&P Global SPGI (ticker: SPGI) moved directly past the BBB- rating when upgrading Tesla’s (TSLA stock) unsecured debt from BB+ to BBB. The previous rating was BB+.
The letters assigned to bond ratings aren’t typically worth much to stock investors. Still, this upgrading raises Tesla’s debt rating from below investment grade, sometimes known as junk status, to investment grade.
According to a news release issued by S&P, the rating agency “now views Tesla’s credit profile more positively” since the company “continues to exhibit market leadership in electric vehicles.” “With rock-solid manufacturing efficiency that bolsters robust [profit] margins and consistent positive free operating cash flow.”
As the firm continues to ramp up production from its two new factories in Texas and Germany, Tesla set a new quarterly production record of 365,923 automobiles during the third quarter. There are now four assembly plants in operation for Tesla all around the world.
In addition, according to projections made by Wall Street, the creation of free cash flow may reach about $10 billion in 2022 and nearly $16 billion in 2023.
It’s a news related to the bond market, but investors in stocks also keep an eye on ratings. Ratings on a company’s debt considered investment grade might bring the cost of borrowing money down. This is one of the tangible benefits that a shareholder receives from a debt upgrade. However, the gain to Tesla appears to be minimal. The firm has more cash on hand than it has borrowings. Thus it is not necessary for it to carry a large amount of debt.
Nevertheless, the upgrading is a recognition by a major bond rating company that Tesla is a stable corporation. This is an important step for Tesla Inc. It represents some level of confidence in the company’s future.
Moody’s still assigns Tesla Inc debt the Ba1 rating, which places it one level below investment grade for the rating agency.
TSLA Stock Price
Following the S&P upgrade, Tesla shares increased by almost $3, or approximately 1%, to over $242. After losing some of their earlier gains, shares were trading 0.9% down on the day at $238.72 as the afternoon closed.
While the S&P 500 and the Nasdaq Composite have both gained over 5% this week, Tesla stock has dropped by about 10% for the week. Tesla set new records for both its deliveries and production during the third quarter. Still, the company did not meet the expectations of Wall Street. (Even though S&P is pleased with output and delivery, investors were hoping for more.) In addition to this, investors are processing the news that Twitter TWTR -CEO Elon Musk will purchase 3.47% (TWTR) at a price of $54.20 per share.
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Author Valerie Remorosa 
