Tesla bonds, equity active as Musk says stock price too high; Restoration Hardware slips

By Stephanie N. Rotondo

Seattle, July 17 – Trading in the convertible bond market remained muted on Mondays, as investors prepared for earnings season to kick into high gear.

Still, Tesla Inc.’s paper continued to be eyed, given comments made by Elon Musk over the weekend.

The 2.375% convertible notes due 2022 initially were seen ticking up half a point to a 119 to 119.25 context, though the underlying equity was off nearly 3.5%. By day’s end, however, the bonds had retreated along with the stock, ending in a 117.25 to 117.5 range.

The company’s shares finished the day 2.5% weaker.

At the National Governors Association summer meeting on Saturday, Musk, Tesla’s founder and chief executive officer, indicated that the stock price was too high.

“I’ve gone on the record several times that the stock price is higher than we have the right to deserve, and that’s for sure true based on where we are today,” Musk said, adding that the high price was due to optimism about the company – despite his own attempts to lower expectations.

But Musk took to Twitter on Monday to clarify his comments.

“Tesla stock is obviously high based on past and present, but low if you believe in Tesla’s future,” he tweeted. “Place bets accordingly.”

Meanwhile, Restoration Hardware Holdings Inc.’s 0% convertible notes due 2019 were in decline on Monday.

A source pegged the paper at 89 bid, 89.25 offered, down 1.5 points to 2 points from previous trades.

A source said the notes hit a high of 89.875, though that was still deemed down at least a point.

The 0% convertible notes due 2020 closed around 84, a loss of 0.25 point to 0.5 point.

The company’s shares were moving up, however, adding $2.20, or 3.33%, to $68.20.

On Friday, the company said it had wrapped a $700 million share repurchase program during the second quarter. With the $300 million shares repurchased in the first quarter, the company has effectively reduced its outstanding stock by about half, according to a press release.

Come Monday, Oliver Chen, an analyst at Cowen, worried that the repurchase might have consequences down the road, considering the company used debt to fund the repurchases.

“Ahead of earnings, we continue to believe RH is trying to pursue the right long-term strategies to make its business truly ‘un-Amazon-able;’ however, we worry additional debt used to help finance the company’s aggressive share buybacks in 2Q may leave the business more vulnerable if comps gets worse or deteriorate and could ultimately hurt RH’s ability to fund the redemption of its $650 [million] zero-coupon convertible senior notes coming due in 2019 and 2020,” Chen wrote.

Quidel Corp. was also notable on the day, after the company announced it was buying the Triage MeterPro cardiovascular (CV) and toxicology assets, as well as the B-type Naturietic Peptide (BNP) assay business run on Beckman Coulter analyzers from Alere Inc.

The news caused a sizable bump in Quidel’s 3.25% convertible notes due 2020.

A source saw the notes open over 117.5 and then close with a 121 handle.

A second source called the issue up 14 points to around 125.

Quidel’s equity was also on the rise, popping $6.90, or 25.35%, to $34.12.

Quidel will pay $440 million for the assets. Alere is looking to divest the businesses as part of its plan to merge with Abbott Laboratories.

Mentioned in this article:

Quidel Corp. Nasdaq: QDEL

Restoration Hardware Holdings Inc. NYSE: RH

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.