Tesla, Inc. TSLA Investors are disappointed that rating agencies describe their favorite company’s creditworthiness as junk.
S&P currently rates Tesla BB+, which is one notch below investment grade. at Moody’s Corporation MCO, Tesla, although it received a two-notch upgrade in January, is still at Ba1, the highest among junk ratings. The agency indicated that it would upgrade the company’s credit rating to investment grade early next year.
What happened: A Tesla influencer, who went by the Twitter handle @TeslaBoomerMama, shared a response from Moody’s to her announcement, expressing her view that the EV maker deserves a credit upgrade.
Moody’s analyst Rene Lipsch clarified that the reasons for junk status are qualitative rather than quantitative. The company’s dependence on a narrow range of products was given as the reason for the not so positive prospects. He also recalled his recommendations that an upgrade could be on the horizon if Tesla successfully expands its global footprint, maintains a strong global competitive footprint, and improves its product breadth.
Among other things, Moody’s is reviewing Tesla’s ability to maintain an EBITA margin of at least 7%, consistent, prudent fiscal policies, and good liquidity.
Another Tesla influencer called David Lee quoted @@TeslaBoomerMama’s tweet and said Moody’s claim that Tesla was not investment grade was ridiculous.
In response to Lee’s tweet, Tesla CEO Elon Musk said, “Moody’s is irrelevant.”
Moody’s doesn’t matter
— Elon Musk (@elonmusk) September 3, 2022
Why a rating upgrade is important for Tesla: An investment grade is a prerequisite for institutional investors who do not exclusively invest in companies with shoddy credit ratings. This explains the relatively small institutional…
