Tick, Tock: Are You Watching Tesla's Bonds and Debt?

It's looking ugly for Tesla (TSLA) in the bond market, at precisely the wrong time.

While Tesla's stock is defended day and night on Twitter by fanboys, the electric car company's bonds tend to get less attention. Hey, bonds are complicated so it makes sense Tesla Twitter trolls won't discuss them on the regular. But in the automaker's case, the bonds shouldn't be ignored by real investors.

Tesla issued $1.8 billion worth of bonds expiring in 2025 on August 11, 2017. The figure was upsized from $1.5 billion and priced at par (100) with a 5.3% yield.

The value of the bonds have trended lower ever since, down about 10%. At last call they were trading just below 90 cents on the dollar. While this is still above the June low near 88 cents on the dollar and the all-time low near 86 in May, it doesn't inspire much confidence in Tesla's long-term outlook.

If the company can produce GAAP profits in the third and fourth quarters, as CEO Elon Musk has promised, then perhaps this will be enough to alleviate some of the concerns of bondholders. At least temporarily. With Tesla producing 4,000 to 5,000 high-end Model 3 units a week, plus its high-priced Model S and Model X, it should be churning out a profit (consistently).

But what happens when it also starts producing the short-range Model 3 alongside the more expensive long-range Model 3? More cash will be needed. What happens when Musk wants to flip the production line switch on Tesla's new pickup truck? More cash will be needed. What happens when Musk decides today is the day to produce the Tesla Semi and the new Roadster, maybe on the same day? More cash will be needed.

The Model 3 and other Tesla models are unlikely to subsidize these ambitions by Musk. Hence, bondholders have good reason to voice their concern on Tesla's long-term viability.

If you need some extra clarity on Tesla amidst the Twitter troll battles, just keep an eye on the bond market. When stocks and bonds disagree, it's usually the latter that's right.

Read more on Tesla's future from TheStreet here.