Tesla’s new convertibles dominate trading, existing notes contract; MercadoLibre active

By Abigail W. Adams

Portland, Me., May 3 – The convertibles secondary market was active on Friday with $1.6 billion in new paper from Tesla Inc. flooding the space.

Tesla was again the name of the day with the electric car manufacturer’s newly priced convertible notes dominating trading activity.

The notes were posting gains on both an outright and dollar-neutral basis.

After expanding during Thursday’s session, Tesla’s 1.25% convertible notes due 2021 and 2.375% convertible notes due 2022 contracted on Friday as the new paper hit the secondary space.

While focus remained on Tesla, earnings related news pushed several outstanding issues into focus.

MercadoLibre Inc.’s 2% convertible notes due 2028 jumped outright but were flat dollar-neutral as stock soared following a large earnings beat.

Tesla expands

Tesla was once again the talk of the town on Friday as its new paper hit the secondary market.

Tesla priced an upsized $1.6 billion of five-year convertible notes after the market close on Thursday at par at the cheap end of talk with a coupon of 2% and an initial conversion premium of 27.5%.

Price talk was for a coupon of 1.5% to 2% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The greenshoe was also upsized to $240 million.

The initial size of the offering was for $1.35 billion with a greenshoe of $202.5 million.

The notes priced concurrently with an upsized $750 million, or 3,086,419 share, common stock offering, which carries a greenshoe of 462,962 shares.

The common share offering priced at $243.00 per share.

Tesla’s new 2% convertible notes due 2024 dominated activity in the secondary space with the notes making gains on both an outright and dollar-neutral basis, sources said.

The notes were seen at 103 bid, 103.5 offered versus a stock price of $252.50 early in the session, a market source said.

The notes rose to 104 in the mid-afternoon.

The notes expanded about 1.5 points dollar-neutral, a market source said.

The notes dominated activity in the secondary space with $500 million in reported volume by the mid-afternoon.

Tesla stock closed Friday at $255.03, an increase of 4.48%.

Tesla contracts

While trading activity centered on Tesla’s new convertible notes, its outstanding issues were active.

However, the notes were contracting on a dollar-neutral basis as its new offering soared.

Tesla’s 1.25% convertible notes due 2021 again popped above par as they climbed alongside stock.

The notes traded as high as 101.875 during Friday’s session and closed the day around 100.75.

However, the notes were contracted about 0.25 point dollar-neutral.

The contraction came after a 0.75 point dollar-neutral expansion during Thursday’s session.

Tesla’s 2.375% convertible notes due 2022 traded as high as 106.5 early in the session but came in as the session progressed and were changing hands around 105.5.

They were contracted about 0.625 point dollar-neutral on Friday after a 0.75 point expansion on Thursday.

The 2.375% notes looked essentially the same as the new 2% notes, a market source said. However, the premium on the 2% notes was cheaper so holders were switching them out.

MercadoLibre’s earnings

MercadoLibre’s 2% convertible notes due 2028 were active with the notes jumping outright but largely moving in line dollar-neutral as stock soared post-earnings.

The 2% convertible notes jumped more than 16 points outright to close Friday’s session at 146.

However, the notes were unchanged on a dollar-neutral basis.

More than $14 million of the bonds were on the tape by the late afternoon.

MercadoLibre stock soared following a large first-quarter earnings beat.

Stock traded as high as $589.57 before closing the day at $578.94, an increase of 20.02%.

The Buenos Aires-based e-commerce company beat on both the top and bottom lines.

MercadoLibre reported earnings per share of 13 cents versus analyst expectations for a loss per share of 13 cents.

Revenue was $473.8 million versus analyst expectations for revenue of $423 million.

Mentioned in this article:

MercadoLibre Inc. Nasdaq: MELI

Tesla Inc. Nasdaq: TSLA

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