Boingo on tap; convertibles trading light; Tesla rebounds; Insmed, Infinera contract

By Abigail W. Adams

Portland, Me., Oct. 1 – The primary market launched the week with a new convertible notes offering.

Boingo Wireless, Inc. plans to price $175 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

BofA Merrill Lynch and Jefferies & Co. are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $26.25 million.

Meanwhile, trading volume was light on the first day of the new quarter, despite some large movements in stock prices.

There was $52 million on the tape early in the session and about $270 million shortly before market close.

Tesla Inc.’s three tranches of convertible notes were back in focus and rebounding on an outright and dollar-neutral basis after news broke over the weekend that CEO Elon Musk and the Securities and Exchange Commission had settled the SEC’s lawsuit.

SolarCity Corp.’s convertible bonds were also improved.

Insmed Inc.’s 1.75% convertible notes due 2025 were down on an outright and dollar-neutral basis as stock cratered on Monday after the Food and Drug Administration approved one of its products with a black box label.

Infinera Corp.’s 2.125% convertible notes due 2024 were also dropping outright and dollar-neutral as stock plummeted as rumors swirled about the company losing its largest customer.

Tesla rebounds

Tesla’s three tranches of convertible notes were rebounding on Monday as stock returned to its previous levels after tanking on Friday.

Tesla’s 0.25% convertible notes due 2019 were up about 3.25 points outright to trade around 102.625 versus a stock price of $304.00.

The notes expanded about 0.75 point dollar-neutral, a market source said.

Of the three tranches, the notes saw the lightest trading volume with about $2 million on the tape shortly before the market close.

The notes are also the lightest hedged out of the three tranches and move with a 25% delta.

While Tesla’s other tranches contracted on Friday, the 0.25% notes held steady dollar-neutral as the notes dropped 4 points outright to trade below par.

Tesla’s 1.25% convertible notes due 2021 jumped 9 points outright. They were seen trading at 104.5 versus a stock price of $308.10. The notes expanded about 1.5 points dollar-neutral.

About $11.5 million of the bonds were on the tape shortly before the market close.

The 1.25% notes dropped about 9 points outright to trade in the 96 range on Friday and contracted about 2 points dollar-neutral.

Tesla’s 2.375% convertible notes due 2022 were the most active of the electric car manufacturer’s convertible notes.

The notes jumped about 10 points outright. They were seen trading at 112.5 versus a stock price of $307.87.

The notes were expanded about 2 points dollar-neutral, a market source said.

About $13.5 million of the bonds were on the tape by late afternoon.

The notes dropped 10 points outright and contracted 2 points dollar-neutral on Friday.

SolarCity’s 1.625% convertible notes due 2019 were up 3 points outright to 90 bid, 90.5 offered, while the soon to mature 2.75% convertible notes due Nov. 1 were relatively unchanged at 98.5.

The SolarCity convertible notes do not trade on a delta, a source said.

Tesla stock closed Monday at $310.70, an increase of 17.35%.

Stock surged after news broke over the weekend that Musk and the SEC had settled the SEC’s lawsuit.

Musk will continue to serve as CEO; however, the settlement removes him from the position of chairman of the board, which Tesla agreed to appoint two independent directors to.

Tesla occupied the focus of the convertibles secondary space on Friday as stock tanked after news broke the SEC was seeking to bar Musk from serving as a director or executive of a publicly traded company.

Insmed contracts

Insmed’s 1.75% convertible notes due 2025 dropped on an outright and dollar-neutral basis on Monday as stock tanked in response to the FDA’s approval of the biotech firm’s new drug ALIS.

The 1.75% notes were down more than 11 points outright. They were seen trading at 78.68 versus a stock price of $16.12.

They were contracted about 1 point dollar-neutral, a market source said. About $7 million of the bonds traded during Monday’s session.

The notes moved down to a 50% delta after starting the day at 60%. “Normally, that’s a good thing, but the credit pushed out,” a source said.

Insmed stock closed the day at $15.74, a decrease of 22.16%.

The FDA approved Insmed’s new drug ALIS to treat a rare lung disease after the market close on Friday.

While approved, the drug’s label will contain a black-box warning about increased risk of respiratory conditions and will restrict its use to treatment-resistance patients, Reuters reported.

Investors were optimistic the drug would be approved to treat a broader patient base, a market source said.

Infinera contracts

Infinera’s 2.125% convertible notes due 2024 were also losing ground on an outright and dollar-neutral basis on Monday.

The notes were down about 9 points outright to trade at 92.75, its lowest level since hitting the market in early September.

The notes were contracted about 0.5 point dollar-neutral, a source said.

Infinera stock closed Monday at $6.175, a decrease of 15.41%.

Stock cratered after an analyst with MKM Research downgraded Infinera stock to sell from neutral and set a new price target of $5.50, which was previously $10.00.

According to the analyst, Infinera may lose its contract with CenturyLink to competitor Ciena Corp.

Infinera issued a press release on Monday contesting some aspects of the analyst’s report and stated a final decision on the CenturyLink contract had yet to be determined.

Mentioned in this article:

Boingo Wireless, Inc. Nasdaq: WIFI

Infinera Corp. Nasdaq: INFN

Insmed Inc. Nasdaq: INSM

Tesla Inc. Nasdaq: TSLA

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