Tesla in focus as stock breaks $400; IAC expands on spinoff; Sea active; Paratek jumps

By Abigail W. Adams

Portland, Me., Dec. 19 – While the year was drawing to a close, the convertibles secondary space continued to see decent trading volume.

There was $300 million on the tape in the mid-afternoon, an above average amount for late December with no new paper, sources said.

Accounts were cleaning up their portfolios and putting money to work, a market source said.

Tesla Inc.’s convertible notes remained in focus as stock broke past $400.00. While the B and C tranches saw a minor improvement, the D tranche was unchanged on a dollar-neutral, or hedged, basis.

IAC/InterActive Corp.’s convertible notes saw a large expansion as stock soared following the announced spinoff of the Match Group.

Sea Ltd.’s 1% convertible notes due 2024 remained major volume movers in the secondary space with the notes gaining outright as stock climbed.

Paratek Pharmaceuticals Inc.’s 4.75% convertible notes due 2024 were also active with the notes gaining as stock soared following news of a government contract.

Tesla in focus

Tesla’s convertible notes saw another day of high-volume activity as stock broke past $400.00.

The 1.25% convertible notes due 2021 were the top traded issue in the secondary space with $18.5 million in reported volume by the mid-afternoon.

The 1.25% notes traded up to 124.5 early in the session with stock up to $402.00.

The notes were changing hands at 123.875 versus an equity price of $401.98 in the early afternoon.

While the notes appeared to be slightly contracted early in the day, the 1.25% notes closed Thursday with a 0.125 point expansion, sources said.

Tesla’s C and D tranches were also active with each seeing more than $12 million in reported volume.

The 2.375% convertible notes due 2022 were changing hands at 138.4 versus a stock price of $403.73 in the mid-afternoon, according to a market source.

They were also expanded about 0.125 point dollar-neutral.

The 2% convertible notes due 2024 rose to 147. However, they were unchanged dollar-neutral.

The D tranche was not expected to move much dollar-neutral due to its high dollar price, a source said.

Tesla stock traded to a low of $396.50 and a high of $406.85 before closing the day at $404.04, an increase of 2.77%.

There did not appear to be any news connected to the surge in Tesla stock. “It’s all momentum,” a market source said.

Short-sellers of Tesla stock were getting killed, the source said.

IAC expands

IAC’s convertible notes were in focus and saw a large expansion after the company announced the spinoff of the Match Group.

The 0.875% convertible notes due 2022 jumped on both an outright and dollar-neutral basis as stock ripped following the announcement.

The 0.875% notes due 2022 traded up more than 10 points outright to 167 early in the session.

They were changing hands at 166.5 versus a stock price of $237.96 later in the afternoon.

The notes expanded about 1 point dollar-neutral, a market source said.

The notes saw more than $10 million in reported volume.

IAC’s 0.875% notes due 2026 were also posting gains on an outright and dollar-neutral basis in decent volume.

The 2026 notes rose about 4 points outright to 110.75 early in the session. They were changing hands at 110 later in the afternoon.

The notes were up about 1.25 points dollar-neutral, a source said.

While the tranche saw the lightest volume, IAC’s 2% convertible notes due 2030 were also on the tape.

The 2% convertible notes rose more than 4 points outright to 114.375 in the late afternoon.

IAC stock traded to a low of $227.01 and a high of $242.72 before closing the day at $238.41, an increase of 7.78%.

IAC announced on Thursday that it was spinning off its shares in the Match Group, which operates a consortium of dating websites.

IAC’s convertible notes have steadily improved in anticipation of the spinoff. The convertible debt will fall to the Match Group, which is a higher vol. stock, a market source said.

Sea active

Sea’s 1% convertible notes due 2024 remained major volume movers in the secondary space with the notes gaining alongside stock.

The 1% notes moved up to a 107 handle on Thursday.

They were changing hands at 107.25 versus a stock price of $38.95 in the mid-afternoon, according to a market source.

The notes saw more than $14 million in reported volume by the late afternoon.

Sea’s American Depositary Shares traded as low as $37.63 and as high as $39.20 before closing the day at $38.82, an increase of 3.22%.

The 1% notes have been active all week.

Paratek gains

Paratek Pharmaceuticals’ 4.75% convertible notes due 2024 saw renewed attention in the secondary space with the notes gaining outright as stock soared.

The 4.75% notes rose 5 points to 69.5 with about $7 million in reported volume. The yield on the small illiquid issue was now 14%, according to a market source.

Paratek stock traded as high as $4.32 before closing the day at $3.90, an increase of 32.2%.

Paratek announced on Thursday that it has been awarded a government contract of up to $169 million to support the development of a treatment for anthrax.

Paratek stock was $13.25 when it priced $140 million of the 4.75% convertible notes in April 2018.

Mentioned in this article:

IAC/InterActive Corp. Nasdaq: IAC

Paratek Pharmaceuticals Inc. Nasdaq: PRTK

Sea Ltd. NYSE: SE

Tesla Inc. Nasdaq: TSLA

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