SpaceX shareholders gamble with creditors' money amid split between stocks and bonds

As October just entered its first week, SpaceX's credit default swap spread soared to 194 basis points. Assuming a 40% recovery rate, the market assigns this company an almost 15% cumulative five-year default probability.

In the same period, the stock price rebounded from a low of $104.83 in early August to $167.60, 24% above its IPO issue price and up 60% from the bottom.

One price suggests the company's debt is becoming increasingly unsafe, while the other says its future is worth betting on.

This isn't a market malfunction, but rather because shareholders and bondholders are sitting at the same gambling table, holding completely different hands.