Chamath Palihapitiya Likes Tesla's Convertible Bonds

Chamath Palihapitiya, the founder and the CEO of Social Capital, spoke with CNBC's Kelly Evans, during the Sohn Conference, about his trading idea in Tesla Inc TSLA.

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He said he loves the five-year convertible bond in Tesla, because it gives you 95 percent of the potential upside of equity and it has a downside risk of a bond. Palihapitiya sees it as a call option on one of the greatest entrepreneurs. It now trades at zero yield, but when Palihapitiya started buying it, the convertible bond yielded 5.5 percent. It can be converted at a premium of 5 percent from the current price.

Palihapitiya explained that when it comes to Tesla, he is betting on CEO Elon Musk, because he sees him as a closest thing to Thomas Edison of our generation.