Illumina contracts post-earnings; Tesla under pressure; SolarCity up; Fortive active

By Abigail W. Adams

Portland, Me., April 26 – Trading activity in the convertibles secondary space was relatively light on Friday with earnings related news continuing to dominate the tape.

There was $70 million in reported volume a little more than one hour into Friday’s session and about $350 million by the late afternoon, sources said.

Illumina Inc.’s convertible notes were among Friday’s major volume movers with the notes contracting as stock dropped post-earnings.

Fortive Corp.’s 0.875% convertible notes due 2022 also saw high-volume activity with the notes dropping outright alongside stock post-earnings.

Tesla Inc.’s convertible notes remained under pressure on Friday with the notes contracting as stock continued to hit new lows.

However, SolarCity Corp.’s 1.625% convertible notes due Nov. 1, 2019 continued to improve.

Illumina contracts

Illumina’s convertible notes were major volume movers on Friday with the B and C tranche contracting as stock fell despite an earnings beat.

Illumina’s soon-to-mature 0% convertible notes due June 15 traded below parity in high-volume activity.

The 0% notes due June 15, 2019 were changing hands at 122.25 with about $12.5 million of the bonds on the tape early in the session.

They were seen trading at 121.5 versus a stock price of $310.45 later in the afternoon, according to a market source. More than $30 million of the bonds were on the tape.

Illumina’s 0.5% convertible notes due 2021 were contracted about 0.5 point dollar-neutral, a market source said.

The notes were trading around 136.875 early in the session.

They were trading at $136.5 versus a stock price of $309.73 later in the afternoon. More than $24 million of the bonds were in play on Friday.

Illumina’s 0% convertible notes due 2023 were also contracted about 0.25 point dollar-neutral.

The notes were changing hands around 107.5 with more than $17 million of the bonds in play.

Illumina stock traded as low as $305.18 on Friday but closed the day at $314.04, a decrease of 1.62%.

Illumina’s convertible notes have been active throughout the week in the run up to the earnings report with holders switching from the shorter duration to the longer duration tranches.

The 0.5% convertible notes were also active on Thursday with the notes contracting about 0.25 point dollar-neutral, a market source said.

While Illumina’s earnings beat on both the top and bottom line, stock was trading down due to a reported slowdown in growth.

Illumina reported earnings per share of $1.60 versus analyst expectations of earnings per share of $1.36.

Revenue was $846 million versus analyst expectations of revenue of $835.5 million.

While revenue was better than expected, the first quarter reflected a marked slowdown in growth with sales in certain segments slipping, the Motley Fool reported.

Fortive in focus

Fortive’s 0.875% convertible notes due 2022 were also major volume movers on Friday with the notes dropping on an outright basis following the industrial conglomerate’s first-quarter earnings report.

The 0.875% notes dropped 1.5 points outright. They were changing hands around 105.5 with more than $31 million of the bonds on the tape.

Fortive stock traded to a low of $80.91 before closing the day at $85.23, a decrease of 2.92%.

Fortive reported non-GAAP earnings per share of 69 cents for the first quarter versus analyst expectations for earnings per share of 68 cents.

Revenue was $1.6 billion versus analyst expectations for revenue of $1.59 billion.

Tesla under pressure

Tesla’s convertible notes were under pressure on Friday with the notes contracting as stock continued to drop to new lows.

Tesla’s 1.25% convertible notes due 2021 were contracted about 0.375 point dollar-neutral, a market source said.

They were changing hands at 98.15 versus a stock price of $232.34 in the late afternoon.

Tesla’s 2.375% convertible notes due 2022 were also down about 0.375 point dollar-neutral, a market source said. They were changing hands around 101.75 versus a stock price of $235.58.

Tesla stock traded as high as $246.68 and as low as $231.13 before closing the day at $235.14, a decrease of 5.04%.

Tesla has been under pressure since releasing its first-quarter earnings report after the market close on Wednesday with large misses on both the top and bottom line.

SolarCity improves

While Tesla’s convertible notes and stock were under pressure on Friday, SolarCity’s 1.625% convertible notes due Nov. 1, 2019 continued to improve – a reflection of investor confidence Tesla would be able to cover the notes’ upcoming maturity, sources said.

The 1.625% notes were up another 0.25 point outright to trade at 97.25 with the yield to maturity now 7.29%.

“There’s confidence in the market these things will be good,” a market source said.

The notes were trading in the 94 range a few months ago, the source said.

Mentioned in this article:

Illumina Inc. Nasdaq: ILMN

Fortive Corp. NYSE: FTV

Tesla Inc. Nasdaq: TSLA

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