NIO on tap; Square convertibles expand; Illumina active pre-earnings; Tesla in focus

By Abigail W. Adams

Portland, Me., Jan. 29 – The convertibles primary market returned to action on Tuesday with one new deal in the works from a Tesla Inc. competitor.

Nio Inc. plans to price $650 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

J.P. Morgan Securities, Credit Suisse Securities, Goldman Sachs & Co. and Morgan Stanley are the bookrunners for the Rule 144A and Regulation S deal, which carries a greenshoe of $100 million.

Meanwhile, volume was light in the convertibles secondary space on Tuesday as the market awaits some highly anticipated earnings reports, specifically from Illumina Inc. and Tesla.

While Illumina’s soon-to-mature convertible notes remained active on Tuesday, trading of its other tranches slowed in the run-up to its fourth-quarter earnings report, which was announced after the market close.

The earnings report will largely set the tone for the convertibles space on Wednesday, a market source said.

Tesla’s 0.25% convertible notes due March 1, 2019 were again the talk of the town with the 20-day averaging period for the notes slated to begin on Wednesday.

All eyes will be on Tesla as the electric car manufacturer announces its earnings after the market close on Wednesday.

Square Inc.’s 0.5% convertible notes due 2023 were among the volume movers on Tuesday with the notes expanding as stock tanked after an analyst downgrade.

ConMed Corp.’s 2.625% convertible notes due 2024 continued to weaken in the secondary space with the notes again down on a dollar-neutral basis.

While trading slowed into the afternoon, PDL BioPharma Inc.’s 2.75% convertible notes due 2021 saw some activity early in the session with the small illiquid issue rarely seen on the tape.

Illumina’s earnings

While trading of Illumina’s tranches slowed in the run-up to its earnings report, the 0% convertible notes due June 15, 2019 remained major volume movers in the secondary space.

The notes were changing hands around 115.75. More than $13 million of the bonds were on the tape by the late afternoon.

Illumina stock continued to trade down on Tuesday, closing the day at $285.26, a decrease of 0.84%.

Stock has seen downward momentum since an analyst downgrade on Friday.

Illumina’s earnings will largely set the stage for the tone of the market on Wednesday, a source said.

Illumina reported non-GAAP earnings per share of $1.32 versus analyst expectations for earnings per share of $1.36.

However, Illumina reported $867 million in revenue versus analyst expectations for $863 million in revenue.

Tesla eyed

While trading of Tesla’s 0.25% convertible notes due March 1, 2019 also tempered on Tuesday, the quickly approaching maturity of the notes was the talk of the town on Tuesday.

The 0.25% convertible notes will enter into its 20-day averaging period to determine if the notes are convertible on Wednesday, a market source said.

Tesla stock would have to be, on average, greater than the $359.81 conversion price over the next 20 days in order to be convertible.

The 0.25% convertible notes continued to trade around 100.375 on Tuesday with about $4 million on the tape.

Tesla stock wavered between gains and losses on Tuesday, trading to a low of $291.80 but closing the day at $297.46, an increase of 0.36%.

Square active

Square’s 0.5% convertible notes due 2023 dropped on an outright basis but expanded dollar-neutral as stock tanked following an analyst downgrade.

The 0.5% notes were down about 6 points outright to close the day at 115.75, according to a market source.

The notes expanded 0.25 point dollar-neutral on the way down, a market source said.

Square stock traded down to close the day at $68.56, a decrease of 10.05%.

Stock was taking a hit after Raymond James analysts downgraded it to “underperform” from “market perform.”

The downgrade was due to lack of growth opportunities, CNBC reported.

The downgrade was also due to Square’s move into credit and bank products with the introduction of a debit card earlier in the month and a renewed application for a loan charter, which the Raymond James analyst said would be a negative for the stock.

ConMed weakens

ConMed’s 2.625% convertible notes due 2024 continued to weaken on Tuesday, shaving off more of its gains from its market debut.

The 2.625% convertible notes due 2024 were trading around 100.8. They were down another 0.125 to 0.25 point dollar-neutral, a market source said.

ConMed stock closed Tuesday at $67.91, a decrease of 0.35%.

The 2.625% convertible notes dropped 0.5 point dollar-neutral on Monday. The notes were expanded about 1.75 points dollar-neutral on their market debut last Friday.

PDL trades

PDL BioPharma’s 2.75% convertible notes due 2021 saw above-average trading volume on Tuesday.

The 2.75% convertible notes were trading around 105.5 with stock largely flat.

Stock closed Tuesday at $3.10, a decrease of 0.32%.

The 2.75% convertible notes saw about $3 million in trades on Tuesday. The small illiquid issue is rarely seen on the tape, a market source said.

Mentioned in this article:

ConMed Corp. Nasdaq: CNMD

Illumina Inc. Nasdaq: ILMN

Nio Inc. NYSE: NIO

PDL BioPharma Inc. Nasdaq: PDLI

Square Inc. NYSE: SQ

Tesla Inc. Nasdaq: TSLA

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.