Convertibles quiet after holiday; SanDisk a little better again; Priceline, Tesla improve

By Rebecca Melvin

New York, April 6 – U.S. convertibles were quiet on Monday following a long holiday weekend and as European markets remained shut for Easter Monday, market sources said.

“It’s very quiet; there is no activity,” a Connecticut-based trader said.

In the broader markets, stocks surged after a sharply lower open and bonds sold off on the heels of Friday’s disappointing March jobs report.

U.S. employers added only 126,000 jobs in March, the weakest pace of hiring in 15 months, the Labor Department reported on Friday. It represented the first month in a year that new jobs came in below 200,000.

The report indicates that the economy weakened in the first quarter, but it also suggests that the Federal Reserve may not raise rates as quickly as some expect at midyear.

In other economic data, the Institute for Supply Management reported an expansion in U.S. nonmanufacturing but at a slower pace in March than previously. The nonmanufacturing purchasing managers index came in at 56.5 in March from 56.9 in February.

The Dow Jones industrial average gained 117.61 points, or 0.7%, to 17,880.85, the S&P 500 gained 13.66 points, or 0.7%, to 2,080.62, and the Nasdaq composite stock index rose 30.38 points, or 0.6%, to 4,917.32.

SanDisk Corp.’s sister convertibles traded some on Monday, resuming their climb higher in action that is related to a takeout rumor that surfaced last week, a trader said.

Priceline Group Inc.’s convertibles also showed up in trading action after Argus initiated coverage on shares of the Norwalk, Conn.-based internet travel services company with a “buy” raging and set a price target of $1,480.00, which represents a 25% premium to the current price.

Priceline’s 1% convertibles due 2018 traded at 135.129, which was up 0.8 point, according to Trace data.

Priceline shares traded up $24.57, or 2%, to $1,185.01.

Meanwhile, Tesla Motors Inc.’s shares surged after the electric car maker reported that it sold a record number of Model S sedans in the first three months of the year, or 10,300 cars, which was up 55% from a year earlier.

Tesla’s 1.25% convertibles, or the B tranche, were last seen at 87.15, which was up about 2 points from Thursday, according to Trace data. The Tesla 0.25% convertibles due 2019, or the A tranche, and the Tesla 1.5% convertibles were not actively traded. But there were Trace data prints on the A tranche at about 90, which was up 1 point to 1.5 points.

Tesla shares rose $12.10, or 6.3%, to $203.10 on Monday.

Herbalife Ltd. shares fell in early action but ended the session up by 1%. There were reports that federal investigators have contacted some of the company’s top members about their own business practices. Herbalife convertibles were not trading actively, but a print went up in the 2% convertible bond at 82.25 on the Trace data feed.

SanDisk bonds better

SanDisk’s 0.5% convertibles due 2020 traded late in the session at 102.75, which was up 1.65 points on the day, according to Trace data.

SanDisk’s 1.5% convertibles due 2017 traded around 141, which was up 2 points, early in the day, and the bonds were last seen up at 143.

Shares of the Milpitas, Calif.-based data storage chip maker gained $2.68, or 4.5%, to $67.25. The stock is off some 30% for the year so far.

“The 0.5% convertibles are better in the last week, and a little better today as well,” a Connecticut-based trader said, citing rumors that it is a takeover candidate.

The company would be attractive to other memory chipmakers including Micron Technology Inc. and SK Hynix Inc., Bernstein analysts said in a research note.

Meanwhile Western Digital Corp. was also mentioned as a possible buyer by analysts.

Samsung Electronics Co. Ltd. and Toshiba Co. have been mentioned as possible acquirers when takeover rumors surrounding SanDisk have emerged previously.

Mentioned in this article:

Herbalife Ltd. NYSE: HLF

Priceline Group Inc. Nasdaq: PCLN

SanDisk Corp. Nasdaq: SNDK

Tesla Motors Inc. Nasdaq: TSLA

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