The price to insure debt holdings in Tesla Inc rose to its highest-ever level on Friday as the bond market showed increasing worries about a default, after the news that CEO Elon Musk had been alleged of fraud by federal regulators.
The automaker’s 5-year credit default swap TSLA5YUSAX=MG hit its highest cost ever on Friday, the day after the U.S. Securities and Exchange Commission stated it was taking legal action against Musk and pushing for his ouster. The agency stated he made a range of “false and misleading” tweets regarding potentially taking Tesla private last month.
Musk stated on Thursday he had not misbehaved. The company’s shares were below 12.3 percent at $269.72 on Friday afternoon.
It costs about $71,300 to insure $1 million of the electric automaker’s debt, including an upfront cost of around 22.45 percent, which was also at an all-time high, accounting for a total of 29.58 percent of the face value of the company’s 2025 junk bond 88160RAE1=RRPS, or about $295,000.
Doubts were evident around in the market. Trading volume of the 2025 junk bond 88160RAE1=RRP increased to $34 million on Thursday, against $6 million on Wednesday, $1 million on Tuesday and $7 million on Monday, as per Reuters trading sources. Traders had quoted the junk bond at 87 cents early on Thursday morning. As of Friday, the figure was at 84 cents on the dollar.