Tesla Motors Inc (TSLA) receives unsolicited S&P junk rating on “niche” position

Posted May 27, 2014

Electric vehicle company Tesla Motors Inc (NASDAQ:TSLA) has received a credit rating by Standard & Poor?s that is six levels below investment grade. The unsolicited B- ranking is based on a business that is constrained by a “niche and independent market position.” Tesla Motors has a smaller scale compared to peers and a narrower product focus. It also has a limited demand for its products, according to the S&P.

Tesla Motors also turned to the debt markets without a ranking from any of the major ratings companies, according to Bloomberg. Tesla raised around $2.3 billion in March by selling convertible debt to fund a battery factory to make more affordable vehicles.

?We believe there is considerable uncertainty in Tesla?s long-term prospects,? stated S&P analysts Nishit Madlani, Dan Picciotto and Joseph Lin in the report. The S&P added that Tesla is less likely to “adapt to competitive and technological displacement risks over the medium to long term.”

This rating was developed independently by their analysts without feedback from Tesla about growth plans, said Tesla Motors spokeswoman Liz Jarvis-Shean in an e-mail to Bloomberg.