Splunk on tap; trading volume light; DocuSign notes in focus; Tesla better; Synchronoss active

By Abigail W. Adams

Portland, Me., Sept. 17 – The convertibles primary market kicked the week off with a billion-dollar offering.

Splunk Inc. launched a $1.7 billion two-tranche offering of convertible notes on Monday, according to a company press release.

The Rule 144A deal consists of an $850 million tranche of five-year notes and an $850 million tranche of seven-year notes.

Each tranche carries a greenshoe of $127.5 million. Further details were not available by press time.

Meanwhile, the secondary space opened the week with light trading volume.

There were about $36 million bonds on the tape early in the session and $225 million in the late afternoon.

DocuSign Inc.’s recently priced 0.5% convertible notes due 2023 remained in focus. The notes continued to trade below par but were improved on a dollar-neutral basis, a market source said.

Tesla Inc.’s three tranches of convertible notes were also improved in active trading on Monday as stock dipped then recovered following news of Saudi Arabia’s investment in a competitor.

Synchronoss Technologies Inc.’s 0.75% convertible notes due 2019, bonds not often seen on the tape, were active during Monday’s session although the notes were largely trading sideways.

DocuSign day two

While trading paled in comparison to their market debut, DocuSign’s recently priced 0.5% convertible notes due 2023 remained a volume leader on Monday with about $10 million bonds on the tape by the late afternoon.

The notes continued to trade below par with stock again down. However, the notes were making gains on a dollar-neutral basis.

The 0.5% notes were trading in a range of 98.75 to 99.875 with stock down 2.5% to 3% early in the session.

They were seen at 98.5 bid, 99 offered versus an equity of $52.00 later in the afternoon.

The notes expanded about 0.5 point dollar-neutral, a market source said.

DocuSign stock closed Monday at $51.69, a decrease of 3.9%.

While the notes traded below par on their market debut on Friday, they were expanded about 0.5 point on a dollar-neutral, or hedged, basis, sources said.

The drop in stock was surprising to some sources given the demand in the tech sector. Concurrently with the convertible notes offering, DocuSign priced 8.06 million shares of common stock at $55.00 a share.

Tesla improves

Tesla’s convertible bonds saw another day of active trading with the notes improving on an outright and dollar-neutral basis as stock firmed after an early morning dip.

Tesla’s 0.25% convertible notes due 2019 were among the most actively traded issues of the day. The notes began the day around 101.25. They were wrapped around 102 in the afternoon.

Tesla’s 1.25% convertible notes due 2021 were also active. The notes also began the day at 101.25 but climbed 2 points outright to close around 103.25.

Tesla’s 2.375% convertible notes due 2022 were up about 1 point outright to 109.375 although the notes were slow to trade.

The three tranches improved about 0.25 point dollar-neutral, a market source said.

While not active on Monday, SolarCity Corp.’s 1.625% convertible notes due 2019 and 2.75% convertible notes due Nov. 1, 2018 remained well bid, a market source said.

After dropping about 2% early in the session, Tesla stock firmed in the afternoon.

Stock traded to a low of $288.13 and a high of $300.87 before closing the day at $294.84, a decrease of 0.12%.

The initial drop in Tesla stock happened after news broke that Saudi Arabia’s sovereign wealth fund had invested $1 billion in Tesla rival Lucid Motors.

The investment was largely expected with reports that it was under consideration hitting the headlines shortly before Tesla’s take private initiative was abandoned.

While Saudi Arabia invested in a rival, the sovereign wealth fund’s investment in Tesla remains unchanged, a market source said.

The fund bought about $2 billion shares of Tesla in early August with news about the investment breaking the same day Musk tweeted he was considering taking the company private.

Musk stated he was under the impression the sovereign wealth fund would back the take-private initiative.

Saudi Arabia’s investment in electric car makers is a strategic move to hedge against oil, Forbes reported.

Synchronoss active

Synchronoss Technologies’ 0.75% convertible notes due 2019 were active on Monday with more than $6 million of the bonds changing hands.

The convertible bonds are not normally seen on the tape, a market source said.

The notes were largely trading sideways. They were trading between 94.375 and 94.5 with the yield 7.28% to 7.128%, according to Trace data.

Synchronoss stock was flat for the majority of Monday’s session but dropped shortly before the closing bell to end the day at $5.52, a decrease of 4.33%.

However, the convertible notes are far out of the money and are a yield to maturity play. Stock was $38.67 when the convertible notes priced in 2014.

Synchronoss stock trades in over-the-counter markets. It was delisted from Nasdaq in May after the company failed to file financial reports for much of 2017.

The software company reported its missing financial reports on July 2 and its financial report for the second quarter of 2018 in August.

A new chief financial officer was also appointed in August.

SoftBank recently announced a partnership with Synchronoss to develop a mobile payments service that would allow customers to make purchases from their mobile devices.

Mentioned in this article:

DocuSign Inc. Nasdaq: DOCU

Splunk Inc. Nasdaq: SPLK

Tesla Inc. Nasdaq: TSLA

Synchronoss Technologies Inc. OTCMKTS: SNCR

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