Tesla Motors Inc., the electric-car company whose stock climbed fourfold last year, was slapped with a junk credit rating by Standard & Poor's because of "considerable uncertainty" about its long-term prospects.
The B-minus ranking, six levels below investment grade, reflects a business "constrained by Tesla's niche and independent market position," S&P said. Tesla has a smaller scale relative to peers, a narrower product focus and limited demand for its products, said S&P, which said its outlook on the rating is "stable."
The youngest publicly traded U.S. automaker has tapped debt markets without a ranking from any of the major ratings companies, according to data compiled by Bloomberg. Tesla, headed by billionaire Elon Musk, raised about $2.3 billion in March selling convertible debt to fund a battery factory to make more affordable models.
"We believe there is considerable uncertainty in Tesla's long-term prospects," S&P analysts wrote in the report. Compared with larger, more established automakers, the Palo Alto company is less likely "to successfully adapt to competitive and technological displacement risks over the medium to long term," they said.
The rating was "developed independently by their analysts without any feedback from Tesla on our growth plans," Tesla spokeswoman Liz Jarvis-Shean said in a statement.
The gains in Tesla shares slowed this year after the company reported first-quarter Model S sales this month that fell below top-of-the-range analyst estimates.
Tesla shares rose $4.26, or 2%, to $211.56 on Tuesday. The shares have risen 41% this year.