Morning Commentary: Twitter convertible notes dominate the tape on Musk buyout offer

By Abigail W. Adams

Portland, Me., April 14 – The convertibles secondary space launched what was expected to be a quiet session with above-average trading volume.

However, one name accounted for more than half of the $155 million in reported volume about one hour into the session – Twitter Inc.

Twitter’s convertible notes were once again thrust into the spotlight by Tesla Inc. CEO Elon Musk, who announced a take-out bid for the company.

While Twitter’s high-premium convertible notes were making gains on the news, the balanced convertible notes were relatively unchanged on an outright basis.

The 0% convertible notes due 2026 jumped 4.5 points outright to 91.

There was $74 million in reported volume.

The 0.25% convertible notes due 2024 continued to trade around 109.

They were changing hands at 109.25 versus a stock price of $47.27.

There was $23 million in reported volume.

Twitter’s stock was in the green despite a rough start for tech stocks with the Nasdaq Composite index down 1.15% shortly before 11 a.m. ET.

Twitter’s stock traded as high as $48.50 early in the session before coming in to trade around $46.93, an increase of 2.36%, shortly before 11 a.m. ET.

Musk announced early Thursday an unsolicited bid to take Twitter private for $54.20 per share valuing the company at $43 billion.

While the market was giving credence to the proposal, “you’re playing with fire when you’re playing with him,” a source said. “He literally could walk away at any moment.”

The news comes days after Musk turned down an offer to join the board of directors.

This is the second time in as many weeks that Musk has moved Twitter’s capital structure to the upside.

Twitter’s convertible notes gained in heavy volume early last week after Musk disclosed a 9.2% stake in the company.

However, they gave back some of their gains by the close of the week as stock, which had broken above $50, gave back much of its gains.

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