Morning Commentary: Tesla down outright, up on hedge; Southwestern Energy mandatory oversubscribed

By Rebecca Melvin

New York, Jan. 14 – Tesla Motors Inc.’s convertibles fell on an outright basis early Wednesday but were improved on a dollar-neutral, or hedged, basis as shares of the Palo Alto, Calif.-based electric car maker were smacked down on news that the company’s fourth-quarter sales in China declined.

“All tranches are better dollar neutral, especially the 1.5% convertible, on their China sales warning,” a New York-based trader said.

Chief executive Elon Musk also said Tuesday that he doesn’t anticipate the company will be profitable until about 2020.

Tesla’s 0.25% convertible due 2019, or the A tranche, was at 88 in active trade, which was down about 2 points outright but up 0.25 point on hedge, the trader said.

Tesla’s 1.25% convertible due 2021, or the B tranche, was also down a couple of points at 84.6 last. But on a hedged basis, the Bs were up 0.5 point.

Tesla’s 1.5% convertibles due 2018 were at about 164, which was down from 172.625 on Tuesday. That was up a point dollar neutral.

Tesla shares were down almost $12.00, or 6%, at $192.50 at late morning.

Cubist Pharmaceuticals Inc.’s 1.875% convertibles due 2020 traded up about 0.5 point to 136.8.

In the primary market, Southwestern Energy Co.’s $1.3 billion offering of mandatory convertible preferred shares was said to be two to three times oversubscribed, and the approximately $500 million offering of common stock “is approaching deal size,” according to a syndicate source.

The mandatory’s timing and talk remained unchanged from launch, with the registered deals expected to price after the market close. Talk on the mandatory was for a dividend of 5.75% to 6.25% and an initial conversion premium of 17.5% to 22.5%.

© 2015 Prospect News.
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