Baozun looks cheap; Bilibili drops below par; Tesla converts in focus, contract slightly

By Abigail W. Adams

Portland, Me., April 4 – The convertible primary market remained active in the latter part of the week with a new deal launching prior to the market open.

Baozun Inc. plans to price $225 million five-year convertible notes after the market close on Thursday.

The deal looked cheap based on underwriters’ assumptions, sources said.

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

With iQIYI Inc.’s successful $1.2 billion issue of 2% convertible notes due 2025, sector peers were piling into the convertibles market.

“These things come in waves,” a source said.

iQIYI’s 2% notes remained major volume movers on Thursday with the notes continuing to drop on an outright basis alongside its stock.

Bilibili Inc.’s 1.375% convertible notes due 2026 also traded down with the notes dropping below par on Thursday after making large gains on both an outright and dollar-neutral basis on their market debut Wednesday.

Meanwhile, Tesla Inc.’s convertible notes dropped outright and were slightly contracted dollar-neutral as stock got crushed following disappointing first-quarter delivery numbers.

Baozun eyed

Baozun 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, the source said.

While the borrow is tough, the deal from the Shanghai-based e-commerce service partner is pricing with a borrow facility.

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

Bilibili below par

As market players eyed the new offering from Baozun, Bilibili’s 1.375% convertible notes due 2026 dropped below par.

After posting large gains on both an outright and dollar-neutral basis on Wednesday, the 1.375% convertible notes from the Shanghai-based online entertainment company were coming in during Thursday’s session.

They were seen changing hands at 100.625 versus an equity price of $17.92 early in the session.

They dropped as low as 98.875 by the late afternoon.

About $15 million of the bonds were on the tape by the late afternoon.

While down outright, the 1.375% notes were largely unchanged dollar-neutral, a market source said.

Bilibili’s American Depositary Shares closed Thursday at $17.23, a decrease of 4.7%.

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

However, the decline in stock and the new offering from Baozun were causing the newly priced convertible notes to trade down.

Flippers were most likely taking some profits off the table and moving to the new offering from Baozun, a market source said.

iQIYI down again

iQIYI’s 2% convertible notes due 2025 also continued to fall on an outright basis as stock came in.

The 2% notes were changing hands at 103.625 in the late afternoon.

More than $15 million of the bonds were on the tape by the late afternoon.

The Beijing-based online entertainment service provider’s ADSs closed Thursday at $23.48, a decrease of 2.09%.

The notes traded as high as 107 on Tuesday but have dropped since Bilibili’s convertible notes priced.

Tesla’s disappointing delivery

Tesla’s convertible notes were active and contracting slightly dollar-neutral as stock got crushed following disappointing first-quarter delivery numbers.

The 1.25% convertible notes due 2021 dropped about 4 points outright. They were changing hands at 101.375 early in the session with stock down more than 8%, according to a market source.

They were seen at 101.7 versus an equity price of $268.11 later in the afternoon.

More than $23.5 million of the bonds were on the tape during Thursday’s session.

Tesla’s 2.375% convertible notes due 2022 were also active. The notes dropped about 5 points outright. They were changing hands at 107.375 versus a stock price of $267.10 in the late afternoon.

About $12 million of the bonds were on the tape during Thursday’s session.

Both tranches saw a slight contraction dollar-neutral, which was disappointing given the stock move, a market source said.

Tesla stock traded to a high of $271.20 and a low of $260.59 before closing the day at $267.78, a decrease of 8.23%.

SolarCity Corp.’s 1.625% convertible notes due Nov. 1, 2019 also traded down 0.5 point outright to 96 in active trading, a source said.

Tesla stock got crushed after the electric car manufacturer’s closely watched delivery numbers fell far short of analyst expectations.

Tesla reported 63,000 deliveries in the first quarter versus analyst expectations for deliveries of 76,000 to 78,000.

Mentioned in this article:

Baozun Inc. Nasdaq: BZUN

Bilibili Inc. Nasdaq: BILI

iQIYI Inc. Nasdaq: IQ

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.