22 June Watchlist 👀

 

Today we are watching…

1. American Airlines (#amerair)

If you’re an airline executive at the moment, you have a straightforward job. You have to find the cash to plug $50 million in cash burn per day or more. You can sell debt, planes, layoff people, ask for government bailouts, or raise capital from the markets. American Airlines is selling $3.5 billion in debt to investors, senior secured notes that mature in 2025. You’re banking on the airline surviving until then if you buy that debt for $100,000 per unit. The implications for the shares is damning. It means American Airline stock gets ruined this week, as $750 million more shares announced will dilute it, and because those new debtors represent more mouths to feed in restructuring before shareholders earn anything. Best case scenario, the stock for American Airlines will flat line at near-zero for the next 5-10 years.

2. Tesla (#tesla)

Elon Musk isn’t bluffing when he says he’s moving Tesla from California to Texas because he’s mad about state officials not letting him open his factory during coronavirus, but it’s going to cost close to a billion dollars to move production. It could be that Musk will just open a new Gigafactory near Austin’s airport for the Cybertruck. It’s a weird one because while Tesla does have showrooms in Texas, it can’t sell any cars face-to-face because it’s not officially using the auto dealership model. The dealerships are for showrooming only, looking around and making the order online. If Tesla brings jobs to Tulsa, it will have more leverage to resolve this!

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OPEC leaders just hosted an important late-November meeting that may signal a change in strategy.

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