Here's what this means for SpaceX for those of you uninitiated in bond-math:

1. SpaceX issued long-term bonds whose coupon (ie, "interest rate") was 6.5%.

2. Those bonds are now trading for less than their face value. That means that if you buy one of those bonds on the secondary market, you will get a return (yield) of 7.387% (if the price of a bond goes down, but the coupon stays the same, the yield goes up).

3. This doesn't affect SpaceX directly, but it tells you that if SpaceX were to issue new bonds today, they would have to offer 7.4% coupon on them, not 6.5%. Note that even though that was caused by a 10% drop in the bond value, it's a 13% increase in cost of borrowing!

SpaceX is a cash-flow negative company that depends on debt and selling equity in order to pay the bills. They will have to issue bonds again, and those bonds will be more expensive.

Note that the shortest maturity bonds don't have to be repaid for 5 years, so the impact on cash is not going to manifest for a while...at least 5 years time (assuming they did another bond offering tomorrow). In that sense it's a nothingburger.

The immediate impact it could have is if spacex depends on issuing new, shorter-term debt (lines of credit, etc) whose price could be impacted by the market's perception of their riskiness.

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toast0 an hour ago | parent | next [-]

> 2. Those bonds are now trading for less than their face value. That means that if you buy one of those bonds on the secondary market, you will get a return (yield) of 7.387%

That's your return if you buy one of those bonds and the bond is paid on schedule. Presumably the market consensus is there's some risk that payment may arrive late or not at all since the yield to maturity has increased since issuance and not as a result of underlying interest rate changes.

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el_nahual an hour ago | parent [-]

I mean, that's what the yield is. The spread between what the bond pays and the Risk-Free Rate (Treasury) tells you what the market thinks the risk of default is.

For a spread of 300 basis points that's still a very low probability, probably under 5%.

	▲	toast0 an hour ago \| parent [-]
		If they had said 'the yield is' or especially the 'yield to maturity' is... that's one thing, but they said "you will get a return of" You'll probably get that, but you might not.

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wg0 an hour ago | parent | prev [-]

Is it the bond or is it the share price that also tanked below IPO level?