Morning Commentary: Baozun on tap; Bilibili comes in; Tesla in focus

By Abigail W. Adams

Portland, Me., April 4 – Thursday opened with another deal in the works. Baozun Inc. plans to price $225 million five-year convertible notes after the market close on Thursday with price talk for a coupon of 1.375% to 1.875% and an initial conversion premium of 30% to 35%.

Underwriters were marketing the deal with a credit spread of 500 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal modeled almost 5 points cheap, according to a market source. While the borrow is tough, the deal is pricing with a borrow facility.

The Rule 144A and Regulation S deal is also expected to see crossover demand from Asian buyers.

Baozun’s offering is the third consecutive deal in the convertibles space to come from a China-based internet company.

The offering from the Shanghai-based e-commerce service partner comes on the heels of Bilibili Inc.’s 1.375% convertible notes due 2026 which made its secondary market debut on Wednesday.

After posting large gains on both an outright and dollar-neutral basis, the 1.375% convertible notes were coming in early in Thursday’s session.

The 1.375% convertible notes were seen changing hands at 100.625 versus an equity price of $17.92. About $5 million of the bonds were on the tape by the late afternoon.

The notes traded as high as 102 on their market debut Wednesday and were expanded up to 1.5 points dollar-neutral.

The notes from the Shanghai-based online entertainment company were coming in with flippers most likely taking some profits off the table and moving to the new deal, a market source said.

Meanwhile, Tesla Inc.’s convertible notes were active in the secondary space as stock got crushed following disappointing first-quarter delivery numbers.

The 1.25% convertible notes due 2021 were among the most actively traded in the secondary space.

The notes dropped about 4 points outright and were changing hands at 101.375, according to a market source.

More than $14 million of the bonds were on the tape less than one hour into Thursday’s session.

Tesla’s 2.375% convertible notes due 2022 were also active. The notes dropped about 5 points outright and were changing hands at 107.375.

About $3 million of the bonds were on the tape early in the session.

Tesla stock was $267.39, a decrease of 8.37%, shortly before 11 a.m. ET on Thursday.

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