Convertibles trading volume light; Tesla rally continues; Fortive active; Chesapeake up

By Abigail W. Adams

Portland, Me., Dec. 23 – The markets were strong but the volume was light on Monday as accounts continued their end-of-year wind down.

The convertibles secondary space saw $30 million in reported volume about one hour into Monday’s session and $160 million by the late afternoon.

Tesla Inc.’s convertible notes remained in focus and continued to gain outright as stock shot past the infamous $420 benchmark in intraday trading.

Fortive Corp.’s 0.875% convertible notes due 2022 were once again on top of the volume charts with the notes gaining alongside stock.

Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 continued to benefit from rising crude oil futures and newly secured financing with the notes gaining on the week.

Tesla’s new high

Tesla’s convertible notes were again in focus on Monday as the upward momentum of its stock continued.

While the notes continued to gain on an outright basis, they were moving in line on a dollar-neutral, or hedged, basis, source said.

The 1.25% convertible notes due 2021, the shortest dated convertible notes, remained the most actively traded of the tranches.

The 1.25% notes were changing hands at 127 versus a stock price of $420.00, a market source said.

The 2.375% convertible notes due 2022 were changing hands at 142 versus a share price of $420.00.

The 2% convertible notes due 2024 traded up to 151, its highest outright level since pricing.

While among the most actively traded issues in the secondary space, each tranche only saw a couple million in reported volume.

Tesla stock shot past the infamous $420 benchmark in intraday trading on Monday before coming in towards the session close.

Tesla stock traded to a high of $422.01 and a low of $410 before closing the day at $419.22, an increase of 3.36%.

Stock broke past $400 last week.

The $420 share price was the tongue-in-check takeout price tweeted by CEO Elon Musk in the go-private debacle of August 2018.

The tweet resulted in an SEC fine, Musk’s removal from the board of directors, and a period of volatility for the electric car manufacturer’s capital structure as investors questioned the company’s future viability.

However, Tesla stock has been on a tear over the past few weeks.

The upward momentum of stock was given an extra boost on Monday following news that the electric car manufacturer had secured $1.4 billion in financing from Chinese banks to support its Shanghai factory.

Fortive active

Fortive’s 0.875% convertible notes due 2022 were once again the top mover in the secondary space.

The notes were changing hands around 101 with stock up slightly.

Fortive stock closed Monday at $76.85, an increase of 1.47%.

After trading below par since September, the 0.875% notes popped above in mid-December and have been wrapped around 101 since last week, according to Trace data.

The investment-grade convertible notes have been major volume movers throughout December with a large seller in the market, sources said.

Chesapeake gains

Chesapeake’s 5.5% convertible notes due 2026 continued to capitalize on the rise in crude oil futures and an improved outlook following new financing.

The notes continued to trade at 50 on Monday, a level they had not seen in a while, a market source said.

The yield on the notes was about 19%.

The notes were still recuperating from a brutal sell-off in early November sparked by a large earnings miss and a ‘going concern’ statement about the company’s future viability that was mentioned in the third-quarter earnings report.

The notes traded as low as 39 in early December. However, they have steadily improved as crude oil futures rebounded and the company secured financing to help tackle its debt burden.

Chesapeake priced a $1.5 billion term loan in early December.

Proceeds from the financing will be used to fund a tender offer for the unsecured notes that Chesapeake subsidiary Brazos Valley Longhorn assumed in its acquisition of Wildhorse LLC.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Fortive Corp. NYSE: FTV

Tesla Inc. Nasdaq: TSLA

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.