Tesla in focus pre-earnings; recent convertible sees large block trade; Clovis active

By Abigail W. Adams

Portland, Me., July 23 – There was a slight uptick in activity in the convertibles secondary space on Tuesday with $46 million on the tape a little more than one hour into the session and $300 million in reported volume heading into the market close.

While few names saw concentrated trading activity, there was one exception – Tesla Inc.

Tesla’s recently priced 2% convertible notes due 2024 saw a large block trade of $60 million bonds, a market source said.

Tesla’s other tranches were also active as holders prepare for the electric car manufacturer’s second-quarter earnings report.

Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 continued to trade down despite a modest increase in oil futures on Tuesday.

Clovis Oncology Inc.’s 1.25% convertible notes due 2025 saw renewed attention in the secondary space with the notes in distressed territory.

Tesla in focus

Tesla’s convertible notes were among the most actively traded during Tuesday’s session with the recently priced 2% convertible notes due 2024 seeing $60 million change hands in a single block.

The 2% convertible notes changed hands about 0.5 point below the bid price in the large block trade in order to complete it, a market source said.

Outside of the large block trade, the notes were largely solidified around 106 on an outright basis.

The 1.25% convertible notes due 2021 were also active. They were changing hands at 99.75 versus an equity price of $259.36.

The 1.25% notes saw about $9 million in reported volume during Tuesday’s session.

Tesla’s 2.375% convertible notes due 2022 were changing hands around 105 with about $4 million in reported volume.

Outside of the large trade in the 2% notes, Tesla’s convertible notes were moving largely in line on a dollar-neutral basis.

Outright accounts were putting money to work, a market source said.

Tesla stock traded as low as $254.50 before closing the day at an intraday high of $260.17, an increase of 1.76%.

Tesla is slated to report its earnings after the market close on Wednesday.

While the consensus among analysts is that Tesla will report a loss of 56 cents per share for the second quarter, it is expected to be far less than the loss reported in the first quarter, Zacks reported.

Tesla stock and convertible notes received a boost after it reported production and delivery numbers that beat analyst expectations in early July.

Chesapeake Energy active

Chesapeake Energy’s 5.5% convertible notes due 2026 again saw active trading on Tuesday. The notes were losing ground despite a modest increase in crude oil futures.

The 5.5% notes were down almost 2 points to 68 on Tuesday, according to a market source.

The notes largely trade for their yield, which was 12.37%. They saw about $10 million in reported volume during Tuesday’s session.

The notes were also among the most active of Monday’s session with the notes also shaving off about 0.625 point.

Chesapeake’s convertible notes were trading down despite modest gains in crude oil futures as tensions rise between Tehran and Washington.

Crude oil futures closed Monday at $57.15, an increase of 93 cents or 1.65%.

Clovis distressed

Clovis Oncology’s 1.25% convertible notes due 2025 saw a fresh round of activity on Tuesday with the notes sinking further into distressed territory.

The 1.25% notes traded down to a 56 handle on Tuesday, according to a market source. The yield on the notes was upwards of 11.625%.

While the notes are typically slow to trade, more than $7 million of the bonds were on the tape during Tuesday’s session.

Clovis stock traded up to $11.20, an increase of 3.32%. However, stock was $54.41 when the convertible notes priced in April 2018.

Clovis is a “one-trick pony” when it comes to revenue stream with Rucaparib one of the only products in its pipeline, a market source said.

If the company does not receive the desired indications from its clinical trials, it will have to raise more money or the company may be done for, the source said.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Clovis Oncology Inc. Nasdaq: CLVS

Tesla Inc. Nasdaq: TSLA

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