Teslas $1.8 billion bond hits a crucial milestone as it surges to its highest level since 2017

Jae C. Hong/Associated Press

• Tesla’s $1.8 billion bond leaped to record highs on Wednesday and traded at face value for the first time since its issuance in 2017.
• The junk bond tumbled to a low of 81 cents on the dollar in May and traded below its nominal value for years as Tesla weathered short-sellers, production delays, and rapid cash burn.
• A bond’s face value is the amount owed to bondholders once the debt reaches maturity. The 5.3% Tesla bond is set to mature in 2025.
• Tesla has enjoyed a 19% stock rally through 2020 after opening a new factory in Shanghai and beating estimates for 2019 deliveries.
• Watch the Tesla bond trade live here.

Tesla’s high-yield bond leaped to its highest levels ever on Wednesday, trading at face value for the first time since its issuance in 2017.

The $1.8 billion debt offering reached a low of 81 cents on the dollar in May, and traded below its nominal value for years as Tesla faced production delays, fervent cash burn, and numerous bets against the firm’s success. 

The Wall Street Journal first reported the bond passing the 100-cents-on-the-dollar level.

A bond’s face value is the amount due to the bondholder once the debt reaches maturity. The 5.3% Tesla bond is scheduled to mature in 2025.

The debt’s record price arrived in tandem with an all-time high for the automaker’s stock. Tesla’s Tuesday jump pushed its market value past the $80.8 billion record set by Ford in 1999, establishing the company as the highest-valued US automaker in history.

Tesla stock continued its streak through Wednesday, rising about 5% to $492.14 by market close. The shares are already up 19% year-to-date.

The electric-vehicle maker has enjoyed a slew of positive results in recent weeks. Tesla on Friday released better-than-expected vehicle deliveries for 2019, sending out 112,000 cars in the fourth quarter while Wall Street expected deliveries to hit 106,000. The fourth-quarter deliveries helped drive a 50% increase in total deliveries from 2018.

Tesla also opened the doors to its new Gigafactory in Shanghai on December 30 and shipped its first Model 3 sedans from the plant on Monday. China-built cars could help the company avoid trade-war tariffs and can sell at a lower price than imported, US-built models.

The Gigafactory also gives Tesla new exposure to China’s rapidly expanding electric-vehicle market, and CEO Elon Musk suggested the company could even design a new model in the country.

“Something that would be super cool … So we’re going to do it … is to try to create a China design and engineering center to actually design an original car in China for worldwide consumption,” Musk said, according to Reuters. “I think this will be very exciting.”

Tesla has 10 “buy” ratings, 11 “hold” ratings, and 15 “sell” ratings from analysts, with a consensus price target of $329.02, according to Bloomberg data.

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