Veoneer convertibles expand on debut; Tesla eyed; IAC down outright, up dollar-neutral

By Abigail W. Adams

Portland, Me., May 23 – As equities again got pummeled on Thursday on fear of a protracted trade war, new convertible paper remained in focus and continued to perform well in the secondary space.

Veoneer Inc. priced an upsized $180 million of five-year convertible notes after the market close on Wednesday. While the notes were volatile on an outright basis, they were posting gains dollar-neutral.

Tesla Inc.’s convertible notes remained major volume movers in the secondary space with stock seeing more than double its average trading volume by the mid-afternoon.

While the recently priced 2% convertible notes due 2024 returned to the black, recouping its losses over the past two weeks, the other tranches were unchanged.

Meanwhile, IAC/InterActive Corp.’s newly priced tranches sank further beneath par on an outright basis. However, the notes improved dollar-neutral.

Veoneer expands

Veoneer priced an upsized $180 million of five-year convertible notes after the market close on Wednesday at the midpoint of talk with a coupon of 4% and an initial conversion premium of 27.5%.

Price talk was for a coupon of 3.75% to 4.25% and an initial conversion premium of 25% to 30%, according to a market source.

The greenshoe was also upsized to $27 million. The initial size of the deal was $150 million with a greenshoe of $22.5 million.

The deal priced concurrently with a $420 million, or 24 million share, common stock offering, which priced at $17.50 per share.

The common stock offering carries a greenshoe of $63 million. The initial size of the common stock offering was $350 million with a greenshoe of $52.5 million.

The new paper was active in the secondary space. While volatile on an outright basis, it was expanding dollar-neutral, sources said.

The 4% convertible notes traded as high as 102.25 prior to the market open.

They were trading in a wide range of 101.5 to 102.5 early in the session.

However, the notes dropped below par as stock got hit alongside the broader market into the afternoon.

The notes traded down to 99 in the afternoon, a market source said.

However, they were expanded 0.75 point to 1 point dollar-neutral, a source said.

“They did well,” a source said.

Veoneer stock traded as high as $17.97 and as low as $16.37 before closing the day at $17.50, a decrease of 2.56%.

IAC improves

While slow to trade early in the session, IAC/InterActive’s newly priced tranches became more active as the session progressed.

The notes sank further below par on an outright basis.

However, they continued to improve dollar-neutral.

The 0.875% exchangeable notes due 2026 were changing hands at 98.5 bid, 99 offered.

They were up another 0.25 point dollar-neutral after about a 0.5 point expansion on their market debut on Wednesday.

The 2% exchangeable notes due 2030 were holding up well despite the downturn in equity.

They were changing hands at 99 bid, 99.75 offered and were expanded about 0.5 point dollar-neutral, a market source said.

The 2% notes expanded about 0.75 point during Wednesday’s session.

IAC stock closed Thursday at $223.26, a decrease of 1.4%.

Tesla in focus

Outside of the new paper, Tesla’s convertible notes remained major volume movers in the secondary space as stock saw more than double its average trading volume.

While the 2% convertible notes due 2024 rebounded on a dollar-neutral basis, Tesla’s other tranches were largely unchanged.

The 2% convertible notes due 2024 traded as low as 86.5 early in the session but were changing hands at 88 in the mid-afternoon as stock reversed its downward trend.

They were expanded 1 to 1.5 points dollar-neutral, a market source said.

The 2% notes were back in the black on a dollar-neutral basis on Thursday after steadily coming in over the past two weeks.

The 1.25% convertible notes due 2021 dropped to 90 early in the session and were changing hands around 90.5 in the mid-afternoon.

The 2.375% convertible notes due 2022 were changing hands at 90.375 early in the session and were changing hands at 90.625 later in the afternoon.

Both tranches were largely unchanged on a dollar-neutral basis on Thursday after all three tranches saw a 0.5 point contraction on Wednesday, a source said.

Stock saw wild price swings on Thursday, dropping as low as $182.16 pre-market only to regain its footing after the opening bell.

Tesla stock traded as low as $186.22 and as high as $199.465 before closing Thursday at $195.48, an increase of 1.43%.

Trading volume for the stock was extremely high, reaching more than double its 50-day average by the mid-afternoon.

More than 26.16 million shares changed hands during Thursday’s session compared to the 50-day average of 10.87 million.

Volume was greater on Thursday than it had been the day of Tesla’s secondary offering in early May, a source said.

The soon-to-mature SolarCity 1.625% convertible notes due Nov. 1, 2019 were also active with the notes garnering more attention as their due date approaches.

The 1.625% convertible notes due Nov. 1, 2019 were changing hands at 94.5 on Thursday with the yield 15.4%.

While the notes got a boost after the pricing of Tesla’s 2% convertible notes and secondary equity offering, they have steadily traded down as Tesla’s stock and bonds have sold off.

Mentioned in this article:

IAC/InterActive Corp. Nasdaq: IAC

Tesla Inc. Nasdaq: TSLA

Veoneer Inc. NYSE: VNE

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