Convertibles trading volume light; Tesla mixed; Cree improves; Pure Storage, AMD gain

By Abigail W. Adams

Portland, Me., Aug. 27 – The convertibles secondary market saw light trading volume on Monday with $40 million of bonds on the tape early in the session and $221 million by late afternoon.

Tesla Inc.’s convertible bonds were active on the tape with the notes mixed amid the latest developments in the electric car manufacturer’s saga.

While Tesla’s 0.25% convertible notes due 2019 saw a dollar-neutral expansion, the company’s 1.25% convertible notes due 2021 and 2.375% convertible notes due 2022 were contracting.

Meanwhile, the soon-to-mature SolarCity Corp. bonds were relatively unchanged with bids for the bonds in line with last week’s levels, a market source said.

Cree Inc.’s recently priced 0.875% convertible notes due 2023 were volume leaders on Monday with the notes up on an outright and dollar-neutral basis after trading largely flat on their debut.

MercadoLibre Inc.’s recently priced 2% convertible notes due 2028 also continued to see improvement in the secondary space with the notes now fully recovered from their initial dollar-neutral contraction.

While trading tempered into the afternoon, Pure Storage Inc.’s 0.125% convertible notes due 2023 were active early in the session and reached their highest outright price since hitting the market in April.

Advanced Micro Devices, Inc.’s 2.125% convertible notes due 2026 jumped above triple par as stock broke out to a new 52-week high on Monday.

Tesla at square one

Tesla was again the talk of the town after CEO Elon Musk announced last Friday night that he was abandoning plans to take the company private.

Tesla’s three tranches of convertible bonds were mixed as the company’s stock saw a volatile session, wavering between flat to down 5%.

Tesla’s 0.25% convertible notes due 2019 were volume leaders in the secondary space on Monday. They were seen trading at 104.875 versus an equity price of $316.90 with about $13 million of the bonds on the tape by late afternoon.

The 0.25% notes were expanding dollar-neutral, a market source said.

Tesla’s 1.25% convertible notes due 2021 saw less activity with about $3 million of the bonds on the tape by late afternoon.

They were seen changing hands at 105.75 versus an equity price of $317.00. The notes were contracting about 0.25 point dollar-neutral, a market source said.

Tesla’s 2.375% convertible notes due 2022 were seen changing hands at 113.375 versus an equity price of $316.73. The notes were contracted about 0.5 point dollar-neutral, a market source said.

Tesla stock closed Monday at $319.27, a decrease of 1.1%.

With confirmation Tesla will remain a public company, it is back to the basics for the electric car manufacturer with attention shifting back to Model 3 production.

The company must now contend with the soon-to-mature SolarCity convertible bonds, which Musk has repeatedly stated the company will be able to cover without the need for an additional capital raise.

Investor sentiment as gauged by the SolarCity bonds was relatively unchanged with bids in line with last week’s levels, a market source said.

SolarCity’s 2.75% convertible notes due 2018 continued to see bids at 98. The 1.625% convertible notes due 2019 continued to see bids at 91.

Last week’s paper

The two deals to price last week were both seen improved on an outright and dollar-neutral basis on Monday.

Cree’s 0.875% convertible notes due 2023 were volume leaders on Monday with about $12 million of the bonds on the tape. The notes were seen changing hands at 101.785 in the late afternoon.

After trading largely flat on their Aug. 22 debut, the notes are now up about 1 point dollar-neutral since issuance, a market source said.

Cree stock closed Monday at $47.28, an increase of 1.26%.

MercadoLibre’s 2% convertible notes due 2028 were also improved on an outright and dollar-neutral basis on Monday although the notes saw light trading volume.

The 2% notes briefly traded up to a 107 handle and were no longer contracted on a dollar-neutral basis, a market source said.

They were seen trading at 106.75 versus an equity price of $375.13 in the late afternoon with about $4 million of the bonds on the tape.

MercadoLibre stock closed Monday at $374.85, an increase of 1.99%.

The 2% notes had a rocky secondary market debut on Aug. 22, trading as low as 98.5 and contracting 1 to 2 points dollar-neutral. However, the notes did an about face and have recouped all of their early losses.

New heights

Pure Storage’s 0.125% convertible notes due 2023 traded up to their highest outright price early in the session as stock began to pull back from last week’s gains.

The 0.125% notes traded up to 118.5 early Monday with stock down a little more than 1%, a market source said.

Pure Storage stock closed Monday at $26.05, an increase of 1.92%.

The stock climbed more than 21% last week after a second-quarter earnings beat.

The convertible notes opened last week in the 105 to 106 range and closed Friday around 118, according to Trace data.

AMD also broke out to new heights on Monday.

The semiconductor company’s 2.125% convertible notes due 2026 jumped more than 40 points outright on Monday as stock broke-out to a new 52-week high.

The 2.125% notes were seen trading at 323.96 versus an equity price of $25.44 in the late afternoon with about $8 million of the bonds on the tape.

The notes last traded at 285, according to Trace data.

AMD stock closed Monday at $25.42, an increase of 6.01%.

AMD announced a new graphics card product on Sunday which helped buoy the break-out of the company’s stock.

Mentioned in this article:

Advanced Micro Devices, Inc. Nasdaq: AMD

Cree Inc. Nasdaq: CREE

MercadoLibre Inc. Nasdaq: MELI

Pure Storage Inc. NYSE: PSTG

Tesla Inc. Nasdaq: TSLA

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