Tesla’s three convertibles jump in heavy volume on strong quarter; Twitter contracts

By Rebecca Melvin

New York, Oct. 24 – Trading in the U.S. convertibles market was dominated on Thursday by two issuers that had posted third-quarter results.

Tesla Inc.’s trio of convertible bonds jumped in heavy volume after the electric carmaker reported an unexpectedly profitable third quarter.

Moving in the opposite direction were the two convertible issues of Twitter Inc. after the social media company reported earnings and revenue that fell short of expectations. Twitter said that software problems during the quarter made some advertisers pull back on spending, which weighed on revenue. Twitter shares tanked.

“Tesla is the only name that anyone cares about today,” a New York-based market source said.

Trading in the three Tesla bonds dominated the Trace tape. The bonds were said to show a pop of 2.5 points to 3 points across the complex on a dollar-neutral basis.

The Tesla Cs jumped 12.6 points on an outright basis to 119. The bonds had been up 9 points to about 113.5 by late morning. But all three bonds, the Bs, Cs and Ds, have similar balanced profiles, the source said.

Shares of Tesla rose as much as 18.2% in early trading. It was last up $45.00, or 17.7%, to $299.68. The spike represented the best single day of trading in the stock since May 2013 and vaulted it to levels not seen since February.

The company showed that it is building cash. For convertible players the report showed that it is more solid in terms of credit, the source said.

Tesla’s 1.25% convertibles due 2021 were seen to have traded at 106, and the Tesla 2.375% convertibles due 2022 were at 114.75, which was up 10 points.

The Twitter 0.25% convertibles due 2024 fell 6 points on an outright basis to 96.75. The Twitter 1% notes due 2021 were also at 96.5, but that was an outright drop of about 1.3 points.

Both the 2024 convertible and the Twitter 1% notes due 2021 were seen to have contracted about a point on a dollar-neutral basis.

“There was a change on the day in the longs,” a market source said, referring to the likelihood of outright selling.

The mandatory convertible of Danaher Corp. was also active on Thursday after the Washington, D.C.-based global science and technology company reported that it anticipates adjusted earnings of $4.74 per share to $4.77 per share.

Danaher’s 4.75% mandatory closed up 74 cents at $1,097.52. Danaher’s common shares closed down $2.01, or 1.5%, to $136.44.

On the international front, China’s Shanghai Pudong Development Bank Co. Ltd. said it plans to issue a large RMB 50 billion convertible bond with a roadshow commencing on Friday regarding the deal.

The SPD Bank convertible is reported to be one of a number that are expected to price in China after a hiatus in convertible issuance there since the first quarter.

Citic Securities Co. Ltd. and Guotai Junan Securities Co. Ltd. are co-sponsors of the SPD bonds.

Joint lead underwriters of the deal are Huatai Securities Co. Ltd., Haitong Securities Co. Ltd. and China International Capital Corp.

The convertibles will have a par value of RMB 100. The initial conversion price is RMB 15.05.

Mentioned in this article:

Danaher Corp. NYSE: DHR

Tesla Inc. Nasdaq: TSLA

Twitter Inc. Nasdaq: TWTR

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