Bond investors give Tesla a $1.8 billion endorsement | VentureBeat | Transportation

(Reuters) — Bond investors on Friday gave a $1.8 billion boost to Tesla Inc’s balance sheet by snapping up the electric car maker’s first foray into the U.S. junk bond market, where yield-hungry investors have raced to lock in relatively higher returns.

Those robust returns, however, have shrunk as a strong reservoir of cash ready to deploy in the riskiest areas of the high-yield fixed income market has pushed them to near their lowest levels in three years. That has given junk-rated issuers such as Elon Musk’s U.S. car company the opportunity to raise cash cheaply.

Tesla sold $1.8 billion of eight-year unsecured bonds at a yield of 5.30 percent, the Palo Alto, California-based company said in a filing with the Securities and Exchange Commission.

The bond was sold at par, according to a source familiar with the transaction, who requested anonymity because the detail was not publicly disclosed.

Tesla initially wanted to sell $1.5 billion worth of debt but enlarged the offering because of overwhelming demand, according to IFR, a Thomson Reuters unit. The yield was slightly higher than the 5.25 percent cited at the initial launch.

Cash proceeds will help finance production of Tesla’s Model 3, which it is banking on to hit the mass market bullseye and finally help the company turn a profit. Tesla aims to boost production to 500,000 cars next year, about six times its 2016 output.

“It’s a milestone for a company from a relative unknown to what it is today,” said David Knutson, head of credit research at Schroders Investment Management.

The company, founded by Musk in 2003, has plowed revenues back into its businesses, which now include energy storage.

At the launch of the Model 3, with a base price of $35,000, Musk warned that Tesla would face months of “manufacturing hell” as it increases production of the sedan.

The ability of the high-yield sector, which some analysts and investors consider pricey, to absorb debt supply from a first-time issuer such as Tesla suggests its resilience, at least for now.

“I won’t call it a bubble,” said Andrew Feltus, co-head of high yield and bank loans at Amundi Pioneer Asset Management in Boston. “The (market) fundamentals are pretty good.”

Standard & Poor’s assigned a B-minus on Tesla’s junk bond issue, while Moody’s Investors Service rated it B3.

While the ability of Tesla to raise so much cash with such a low rating might revive memories of market bubbles such as the dot-com boom, strategists said that analogy did not apply.

“Tesla is not one of these companies,” said Stan Shipley, a strategist at Evercore ISI in New York.

Investor appetite has driven the average yield on U.S. B-rated corporate bonds to 5.72 percent late this week, down 0.37 percentage point since the end of 2016 and below its recent peak of 10.18 percent in February 2016, according to Bank of America Merrill Lynch. .MERH0A2

The benchmark 10-year Treasury yield US10YT=, in contrast, was 2.19 percent after hitting a six-week low earlier Friday.

Along for the ride

Despite lingering skepticism, there has been no shortage of funds to fuel Tesla’s ambition to popularize electric cars.

Investors who jumped on the bandwagon have been rewarded.

Tesla has raised $3.3 billion in convertible bonds, which have performed well, in step with its stock.

The stock ended up 0.7 percent at $357.72 on Friday, a near-1,400 percent increase since its debut in June 2010 at $17 a share.

Tesla might have picked just the right time to become a junk bond issuer.

Investors have jumped on new supply as defaults are expected to remain low, with the economy growing at a modest pace with little inflation.

“There is a lot of liquidity in the market. There’s, on average, adequate compensation for investors,” said Robert Tipp, chief investment strategist at PGIM Fixed Income.

Is OnePlus revamping it’s brand strategy? Bringing in a celebrity endorsement paves the path to success

In an era when most mobile brands are obsessed with pitching themselves as selfie-specialist devices, (at least 3 brands – Gionee, Vivo and Oppo have made campaigns around their selfie-capabilities) one phone brand is treading a different path.

Hold the admiration though; the brand in question, OnePlus, is going down formulaic path No 1 for brands across categories -getting a celebrity for a mass-media blitz.

We have nothing against marketers deploying the X-factor of celebs but when a brand becomes famous for its differentiated, unconventional marketing and then seemingly falls prey to convention, questions are bound to be asked.

Historically OnePlus is known to have done some kick-ass clutter breaking stuff to announce its entry.

Whether launching a phone from a virtual space station deploying VR (virtual reality), or doling out access to the phones via invites that could be got only from existing customers, to nearly convincing people to smash their phones during the launch phase or the controversial ‘Ladies First’ campaign, the global launches have been news-makers and often polarising.

In India, the brand created a lot of chatter around its fan-based offerings and the recently launched first-ever OnePlus experience centre in Bengaluru – all giving the brand a distinct and niche personality.

So why go the traditional route now – splurging marketing dollars on one of the most expensive (and many would add ubiquitous) celebrities? And of course the additional media-spends to give the campaign a life? Is it a reality of the Indian market that brands across spectrum, to attain size and scale, have to go mass? According to Girish Menon, director & head, media & entertainment, KPMG India, “Such is the scale and diversity in India that brands – even digital natives like Uber or OnePlus – have to think integrated and cross-platform to be most effective.”

Its niche credentials have ensured that while OnePlus does not feature in the Top 10 smartphone brands in India (with its limited product portfolio as well as limited channel presence), the brand competes well in the premium segment (US$300+) and ranks as the 3rd largest smartphone brand after Apple and Samsung, as per IDC figures.

In a campaign created by BBDO India, OnePlus has got superstar Amitabh Bachchan to reinforce its flagship product OnePlus 3T’s claim of being the highest rated smartphone listed on Amazon.

This is basis the cumulative rating for the product as on 1st March 2017, validated by research agency Nielsen, shares Vikas Agarwal, general manager – OnePlus India.

While Agarwal accedes that this is the first time in OnePlus’ history that a brand-campaign of this size with an A-class celebrity has been done. He also clarifies that Bachchan’s role is not that of a traditional brand ambassador.

“He’s one of the biggest celebs on digital channels and a big OnePlus fan himself and there is a natural connect for the digital-first brand.” Shares Carl Pei, co-founder of OnePlus in an exclusive chat with Brand Equity, “We are still a digital focussed brand, essentially built around word of mouth.” That is something we want to highlight even with this campaign, he adds.

Both OnePlus along with the other Chinese-origin brand Xiaomi started life as challenger brands. It would be interesting to see, how a mass-campaign like this impacts OnePlus’ go-to-market strategy.

Views Jaipal Singh, market analyst-client devices, IDC (International Data Corporation), while mass-campaigns like this may give the brand wider reach with new audiences which are not very tech savvy, going mainstream has a higher cost and the brand needs to be careful about not letting its strong positioning be impacted.

Adds Girish Trivedi, co-founder of Monk Consulting, a Gurgaon based research and advisory firm, “A great product is a starting point, which OnePlus can boast about, but they need to decide whether they want to serve the niche or broad base: if they expand then more devices with multiple price-points is a must.”

Offline distribution or traditional distribution will surely help but again it’s a cost vs gains dilemma, he adds. So far, the brand has been selling through Amazon and has recently launched its own ecommerce platform.

Celeb or no celeb, as long as the brand continues to build on its stated positioning of being ‘fan-obsessed’ to the point of tweaking its offerings basis fan (aka customer) suggestions, it could emerge as formidable competition to leaders like Apple and Samsung. Failing that, we are guessing, there’ll always be room for one more ‘selfie expert.’

Carl Pei wants to make the best smartphone, not the biggest.(Image: Agencies)

What is the single biggest challenge of being in the Indian market?

India is a vast and diverse demography where the needs of the customers are dynamic and unique and what is good for one segment need not necessarily satisfy others.

We need to keep reinventing ourselves to stay relevant. After the successful launch of OnePlus 3, we launched the OnePlus 3T with features such as the Dash Charge to give the users a day’s power in half an hour to cater to their fast-paced lifestyles.

Our community is very important to us, and we constantly engage with them to listen to their feedback and see how best we can cater to their dynamic requirements.

Even our latest offering, the OnePlus 3T MidnightBlack, is a product of the feedback we have received from our community.

OnePlus’ maiden brand campaign launched recently in India with a celebrity, seems to mark a sharp shift from its stated challenger-brand philosophy?

For us, the goal of the campaign was help spreading word that OnePlus 3T is the best rated smartphone in India and the concept of the campaign was about a fun and easy to understand way of communicating that.

The current campaign is a scaled-up version of word-of-mouth marketing.

We plan to become the third biggest brand in the premium segment – and we want to spread the word about this positive feedback among the large smartphone user base in India.

How much cut-through has the brand managed by getting Amitabh Bachchan as its face in a tough market?

We brought in Amitabh Bachchan as our first OnePlus Star as he perfectly embodies the mantra of ‘Never Settle.’

No one else provides the same level of personality that Mr.Bachchan has.

As a OnePlus Star, he will continue to play a key role in strengthening community connect and improving brand familiarity beyond our core audience.

Any anecdotal memories of working with the biggest star of Indian entertainment industry?

He helped us improve the campaign creative, finding ways to make it more engaging for viewers.

We have also been extremely impressed with his passion and knowledge of technology.

Does OnePlus continue to hold the ambition of ‘not wanting to be the biggest electronics maker in the world’?

Our goal is to be the best premium smartphone, not the biggest.

We believe that if you create the best products and offer the highest level of service, it’s hard not to be successful in the long run.

Currently, our focus is on delivering the best possible premium smartphones and we are not planning to diversify into any other category in the near future.

How does the OnePlus Experience Store align with the brand’s plans? Why did you choose India to launch it?

India is strategically very important because of the sizeable existing user base and untapped market potential, especially in the premium segment.

The OnePlus Experience Store in Bengaluru is a first platform of its kind in India where we can engage face-to-face with our community.

Besides giving consumers a chance to experience the product hands-on, we also plan to host several activities for our community members to collaborate, share and learn together.

We have recently started sales of OnePlus smartphones on our own channels (OnePlus Experience Store in Bangalore and for pan-India delivery).

These additional sales channels complement our exclusive sales presence on Amazon by offering a more personalised purchase experience and easier availability of genuine accessories and fan merchandise.

Ps4 Vs Xbox One – Final Verdict

In Summary:
Ps4: For gamers, by gamers. The ultimate game console and gaming system. its awesome. Whether its AAA titles like Second Son or Indie games like Contrast and Rezogun, these guys have an amazing GAMING console.
Xbox: A wonderful entertainment console… that also plays games. Enhanced tv watching, enhanced music/video streaming, built in skype, snapping a web browser onto your screen while you wait to matchmake your online games. Just a great entertainment experience (but you sacrifice somewhat on the video quality for games)

Pick the one that’s right for you!

Sessler’s Xbox One Review:
Sessler’s ps4 Review: