While this year alone the California-based electric automaker had its shares jump fourfold, Standard & Poor’s, the biggest credit-rating company in the world, has moved to rate it poorly.
According to Standard & Poor’s, the junk credit rating – an unsolicited “B –“ ranking, which is six levels below the comfortable investment grade, comes from “considerable uncertainty” over the long-term strategy and prospects.
“We believe there is considerable uncertainty in Tesla’s long-term prospects,” S&P analysts Nishit Madlani, Dan Picciotto and Joseph Lin wrote in their report. “Constrained by Tesla’s niche and independent market position,” the company is unlikely “to successfully adapt to competitive and technological displacement risks over the medium to long term.”
According to Liz Jarvis-Shean, a spokeswoman for Tesla, the rating was “developed independently by their analysts without any feedback from Tesla on our growth plans.”
According to S&P, Palo Alto, California-based Tesla is an automaker with a considerably smaller scale than others, has a narrow product line and taps into limited demand for the products now on offer, and the outlook for the rating doesn’t look to be challenged in the future.
So far, Tesla – which is the best performing and youngest publicly traded US automaker in recent years – has managed to avoid any rating from major companies, successfully selling convertible debt to finance their plans of building a massive battery factory in the US.