Tesla convertibles flat after earnings miss; Anthem adds on swap; FireEye contracts

By Rebecca Melvin

New York, Nov. 4 – Earnings news remained a focus in the convertibles secondary market on Wednesday, while the primary market was quiet again – both internationally and in the United States – with no deals yet priced in the U.S. market this week and only one internationally.

Tesla Motors Inc., which has a trio of convertible bonds, reported earnings late Tuesday that pushed its shares 11% higher, and the bonds traded higher on an outright basis but flat on a swap basis.

There was a continuation of activity in AMAG Pharmaceuticals Inc.’s convertibles, which plunged on an outright basis in active trade on Tuesday after the Waltham, Mass.-based specialty pharmaceutical company reported quarterly results that missed estimates. AMAG common shares extended losses Wednesday, trading down another 3%, after dropping 23% on Tuesday.

Elsewhere in health care, Amarin Corp. reported earnings, as did Regeneron Pharmaceuticals Inc. and Array BioPharma Inc. But a notable focus was Anthem Inc., the Indianapolis-based health benefits company, which saw its 2.75% convertibles trade up a bit on a swap basis.

FireEye Inc.’s two convertible bond issues contracted slightly on a swap basis ahead of the security company’s quarterly results, which were posted after the market close and brought the common shares down 15% in after-hours trading action.

Tesla flat post earnings

The two newer Tesla convertibles added several points each with the underlying shares gaining 11% as investors looked past a miss on the company’s quarterly earnings report and were cheered by higher car production figures.

The Tesla 0.25% convertibles, or the A tranche, due 2019 changed hands at about 93.25, which was up from 90.42 on Tuesday, according to Trace data.

The Tesla 1.25% convertibles, or the B tranche, due 2021 traded at 91.5, which was up from 88 and change on Tuesday.

The Tesla 1.25% convertibles were not a focus of trade.

Tesla shares jumped $23.28, or 11%, to $231.63.

“Both Teslas were active on the back of earnings,” a New York-based trader said, calling the bonds unchanged, or flat, on a swap basis.

The delivery guidance for the fourth quarter was better than expected. It implies a 55% increase quarter over quarter on deliveries of its Model S and Model X vehicles.

For the quarter, Tesla reported a wider-than-expected loss of 58 cents per share. Analysts were expecting a loss of 50 cents per share.

Anthem expands 0.5 point

Anthem’s 1.75% convertibles traded a little lower on an outright basis in tandem with the underlying shares at 182 bid, 182.875 offered versus an underlying share price of $133.75, a Connecticut-based trader said.

But on a swap basis, the bonds were better by 0.5 point, a second trader said.

Anthem also has a $1.25 billion issue of 5.25% convertible equity units. The market in those was “pretty wide,” a New York-based trader said, quoting the paper at 45.5 bid, 47 offered against the closing common share price of $135.34, which was down $1.71, or 1.3%.

“There was a lot of stuff on the tape in the bond itself,” the trader said. “We had the bonds higher.”

FireEye contracts 0.25 point

FireEye’s 1% series A convertibles due 2035 were seen at 87.75 bid, 88.5 offered versus an underlying share price of $29.00 at the end of Wednesday’s session.

The FireEye 1.625% series B convertibles due 2035 were seen at 86.25 bid, 87 offered versus the same $29.00 share price.

Both issues contracted on a swap basis by about 0.25 point, a New York-based trader said.

Shares of the Milpitas, Calif.-based network security company closed at $29.12, which was up 19 cents, or 0.7% on the day. But they dropped sharply in after-hours trade to about $25.00.

The A tranche has a put in 2020, and the B tranche has a put in 2022.

A second source said that the quarterly report, which showed a wider loss that was expected and lower revenue than expected would precipitate “rebalancing” in the convertibles on Thursday.

FireEye revenue for the period ended Sept. 30 rose 45% to $165.6 million, but the amount was below expectations for revenue of $167.1 million.

Meanwhile, the company lost $135.5 million, or 88 cents per share, compared to $120 million, or 83 cents per share in the year-earlier period.

Mentioned in this article:

AMAG Pharmaceuticals Inc. Nasdaq: AMAG

Amarin Corp. Nasdaq: AMRN

Anthem Inc. Nasdaq: ANTM

Array BioPharma Inc. Nasdaq: ARRY

FireEye Inc. Nasdaq: FLDM

Regeneron Pharmaceuticals Inc. Nasdaq: REGN

Tesla Motors Inc. Nasdaq: TSLA

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