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Subject:  Re: Tesla, Invest When Others Are Fearful....? Date:  5/1/2019  1:05 PM
Author:  TSLAQPodcast Number:  113447 of 116470

In fact, I got the impression that he did not recommend the stock rather he was happily invested in the convertible bonds knowing that if the company goes bankrupt the bond holders get paid out first (before ordinary shareholders).

One of the biggest things I have noted in following the Tesla saga extremely closely over the past roughly 10 months an apparent large knowledge gap with Tesla fans/shareholders not recognizing the importance of a capital structure and the hierarchy within a capital structure. Equity is subordinate to debt. Common stock is subordinate to preferred stock (when such exists), etc.

Even with Chamath showing much more knowledge/recognition of this with the above, he should still caution against the fact that the convertible bond holders are subordinate to the senior bonds and some of the other creditors.

One aspect that helped Tesla immensely in March was an increase in the cap for their ABL (asset backed loan) of about $500M. They likely drew over $400M of that within Q1, without which their cash balance would have been about $400M worse. If I am not mistaken the ABL entities are above the convertible bond holders in the capital structure of Tesla.

Over coming weeks, I won't be surprised to see some nice graphics on Twitter spelling out specifically what the order of preference is within Tesla's capital structure. In fact, I might suggest that via a Tweet in the next few days or less.

Disclosure: should go without saying based on my name
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