Morning Commentary: Tesla convertible notes quiet post-earnings; Guess? holds expansion

By Abigail W. Adams

Portland, Me., April 25 – The convertibles secondary space was quiet early in Thursday’s session as equity markets tumbled on mixed earnings and weak economic data.

Tesla Inc.’s convertible notes only saw a few trades on the tape with stock down slightly after a large earnings miss.

The 2.375% convertible notes due 2022 were the most active of the tranches with the notes contracting slightly dollar-neutral, according to a market source.

The notes were changing hands at 105.75 early in the session. They were coming in about 0.375 point on a dollar-neutral basis.

Tesla’s 1.25% convertible notes were trading at par although only a few trades were on the tape.

Tesla stock was $251.55, a decrease of 2.75% shortly before 11 a.m. ET.

From a technical perspective, some are saying that $250 may be the bottom for Tesla stock with players establishing their hedges accordingly, a market source said.

However, with Tesla “you never know,” the source said.

While Tesla stock was relatively stable early in Thursday’s session, it was volatile in after-hours trading on Wednesday with stock down substantially in the run up to the earnings announcement only to recover afterwards.

Tesla reported non-GAAP losses per share of $2.90 for the first quarter versus analyst expectations for losses of $1.15 per share.

Revenue was $4.5 billion versus analyst expectations for revenue of $5.4 billion.

While Guess? Inc.’s 2% convertible notes due 2024 dominated the secondary space on their market debut Wednesday, they were quiet early in Thursday’s session.

The notes continued to trade around 103 although only $2 million of the bonds were on the tape early in the session, a market source said.

The notes were holding on to their expansion on their market debut.

Guess? stock was off slightly early in the session but rose to $19.85, an increase of 1.15%, shortly before 11 a.m. ET.

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