What's interesting is that at the level of rating that Tesla has, most bond investors are active traders of one form or another rather than "buy and hold" inves

What's interesting is that at the level of rating that Tesla has, most bond investors are active traders of one form or another rather than "buy and hold" investors. The most common strategy is to look for credit migration (ie buy the bond when it's B-, sell it when it relatively quickly moves up to BB and benefit from the capital appreciation as the yield or spread drops in consequence). A lot of them are 2+20 hedge funds. The people who play in that market are all professional investors and if they play in enough size they have good access to management. So yes, they are probably more savvy than the average equity investor; the bonds falling doesn't mean they think a default is neccessarily on the horizon, just that a ratings upgrade is not (and potentially also that the company will come back for more money sooner rather than later, as that implies more supply vs demand which may not scale equally). This would all seem to make a good case for the equity being overpriced, but to short the equity you need a conviction that the rest of the market will realise this sooner rather than later.