Morning Commentary: Tesla bonds up, equity drifts as Musk says price is too high

By Stephanie N. Rotondo

Seattle, July 17 – Trading in the convertible bond market remained muted in early Monday dealings, as investors prepared for earnings season to kick into high gear.

Still, Tesla Inc.’s paper continued to be eyed. A market source saw the 2.375% convertible notes due 2022 ticking up half a point to a 119 to 119.25 context by mid-morning.

The underlying equity (Nasdaq: TSLA), however, was down almost 3.5%, following comments made by Elon Musk over the weekend.

“I’ve gone on the record several times that the stock price is higher than we have the right to deserve and that’s for sure true based on where we are today,” Musk said at the National Governors Association summer meeting on Saturday.

Musk noted that the high price was due to optimism about the company, despite his own attempts to lower expectations.

Meanwhile, Restoration Hardware Holdings Inc.’s 0% convertible notes due 2019 were in decline on Monday.

A source pegged the paper at 89 bid, 89.25 offered, down 1.5 to 2 points from previous trades.

The company’s shares (NYSE: RH) were moving upward, however, adding 3.3% in early dealings.

On Friday, the company said it had wrapped a $700 million share repurchase program during the second quarter. With the $300 million shares repurchased in the first quarter, the company has effectively reduced its outstanding stock by about half, according to a press release.

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