Morning Commentary: Illumina hits the market, dominates trading; Tesla notes active

By Abigail W. Adams

Portland, Me., Aug. 17 – New convertible notes from Illumina Inc. hit the secondary space on Friday, dominating trading activity.

Illumina priced $650 million of five-year convertible notes after the market close on Thursday with a coupon of 0% and an initial conversion premium of 40%.

Pricing matched talk for a coupon of 0% and came at the midpoint of talk for an initial conversion premium of 37.5% to 42.5%.

Illumina’s new 0% notes accounted for $73 million of the $133 million bonds on the tape early in the session. They were up on an outright basis and were wrapped around 101 in active trading.

While sources pegged the deal rich, it was multiple times oversubscribed during bookbuilding, a source said.

Illumina is an investment-grade company, and the bonds may receive an investment-grade rating.

“It’s impossible to find IG converts,” a market source said.

The demand drove the pricing of the notes with the deal attracting crossover equity and IG investors, the source said.

Illumina’s 0.5% convertible notes due 2021 remained active early in Friday’s session after high-volume trading on Thursday. The notes were seen changing hands at 140, a market source said.

Illumina stock was up about $2 to $329.21 shortly after the market opened but settled and was trading largely flat about an hour into the session.

Meanwhile, Tesla Inc.’s convertible notes were active in the secondary space as the company’s stock took a hit after CEO Elon Musk’s tell-all interview with the New York Times.

The 0.25% convertible notes were trading around 103.125 on an outright basis with about $10 million bonds on the tape.

The 2.375% convertible notes were trading around 111.25. Tesla stock was down about 8% in early trading.

In the interview, Musk admitted his tweet about taking the company private with funding secured had not been reviewed before it was posted.

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