Pure Storage convertibles climb; Transocean remains in focus; Zendesk, Tesla active

By Abigail W. Adams

Portland, Me., April 13 – The convertibles secondary market rounded out a week of low trading volume on Friday.

Trading volume has been thin all week amid earnings blackout periods for many financial issuers.

However, the convertibles market remained on firm footing, sources said.

While no new paper entered the space this week, Pure Storage Inc.’s 0.125% convertible notes due 2023, which hit the market on April 5, rounded out the week strong.

The notes have expanded about 0.75 point dollar neutral since the week began, a market source said.

Transocean Inc.’s 0.5% convertible notes due 2023 remained active on the tape. The 0.5% convertible notes traded up to 130 on Friday, a 4-point increase on an outright basis, after a week of gains.

Tesla Inc.’s three tranches of convertible notes also remained in focus with the notes rebounding outright as investors express renewed confidence after a sell-off in late March.

Zendesk Inc.’s 0.25% convertible notes due 2023 traded up to 104 on an outright basis on Friday after trading below par on Monday.

Pure Storage strong

Pure Storage’s recently priced 0.125% convertible notes closed their first full trading week strong.

While few bonds traded, the notes were seen at 101.322 with equity down to $19.11 early Friday. The notes were trading below par on Monday.

However, they have expanded on a dollar-neutral basis throughout the week, sources said. The notes were up about 0.75 point dollar neutral by week’s end.

Pure Storage priced an upsized $500 million of five-year convertible notes prior to the market open on April 5.

The deal from the Mountain View, Calif.-based flash data storage company was heavily oversubscribed during the subscription process and in hot demand on its first day in the market.

The notes expanded about 1.5 points dollar neutral on their market debut but traded down as stock dropped off.

Zendesk active

Zendesk’s 0.25% convertible notes due 2023 also rounded out the week strong after trading below par on Monday.

The notes traded up to 104 on an outright basis in active trading during Friday’s session, a market source said.

Zendesk stock closed Friday at $48.85, an increase of 0.6%.

The 0.25% notes were seen trading at 99.5 on Monday with stock at $45.17. They expanded on Wednesday by 0.25 point dollar neutral, a market source said.

The notes were seen trading in a range of 101 to 102 with stock closing Wednesday at $47.33.

The San Francisco-based customer service software company priced $500 million of the 0.25% convertible notes on March 16.

The notes have wavered between just above and just below par since hitting the market.

Transocean in focus

Transocean’s 0.5% convertible notes due 2023 remained active on the tape and continued to trade up on an outright basis as its stock climbed. The 0.5% convertible notes traded up to 130 on Friday, a 4-point increase.

Transocean stock closed Friday at $11.59, a 4.41% increase. Transocean’s 0.5% convertible notes and stock have made large gains throughout the week as the price of crude oil saw dramatic increases.

Prior to Tuesday, the 0.5% convertible notes were trading in a range of 110 to 116, according to Trace data. Transocean stock closed Monday at $9.90.

The barrel price of West Texas Intermediate crude oil for May 2018 delivery continued to climb on Friday, closing the day at $67.39, an increase of 32 cents or 0.48%.

The 0.5% convertible notes were issued as part of an exchange agreement in Transocean’s acquisition of Songa Offshore SE, which was completed on March 30.

Transocean plans to release its first-quarter earnings report after the market close on April 30.

Tesla strong

Tesla’s three tranches of convertible notes also closed the week strong with the notes returning to the levels seen prior to a sell-off in late March.

Tesla’s 0.25% notes due 2019 traded in a range of 103 to 104 on Friday, which is where they have traded for much of the week, according to Trace data.

Tesla’s 1.25% notes due 2021 traded up to 105 on Friday after spending much of the week in the 103 to 104 range. Tesla’s 2.375% notes traded up to 112 on Friday after spending much of the week in the 109 to 111 range.

Tesla stock closed Friday at $300.34, an increase of 2.13%.

The fortunes of the electric car manufacturer seem to have shifted with investors showing renewed confidence after a sell-off in late March.

Tesla’s convertible notes and stock dropped the last week of March and early April amid an onslaught of negative publicity.

With Tesla’s production numbers for its Model 3 sedans better than expected, assurance Tesla will not need an additional capital raise, and China signaling it will stick to its promise to lower tariffs on imported cars and loosen restrictions on foreign ownership in joint ventures in the automobile industry, Tesla’s convertible notes and stock have rebounded from their recent lows.

Tesla’s 0.25% convertible notes dropped to 99, Tesla’s 1.25% convertible notes dropped as low to 96 and Tesla’s 2.375% convertible notes dropped to 101 on March 28 when the sell-off began.

Mentioned in this article:

Pure Storage Inc. NYSE: PSTG

Tesla Inc. Nasdaq: TSLA

Transocean Inc. NYSE: RIG

Zendesk Inc. NYSE: ZEN

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