Morning Commentary: NIO convertibles extend rally; PG&E new convertible notes maintain gains

By Cristal Cody

Tupelo, Miss., Dec. 19 – NIO Inc.’s convertible notes added around 1.5 to more than 2.5 points early Tuesday following gains of more than 5 points Monday after the company reported a $2.2 billion investor cash infusion.

“They’re the top player,” a source noted over the morning. “It came from the depths of the abyss – so it’s doing pretty well at 101 and some change. The stock came back, the bonds came back.”

NIO’s 4.625% convertible notes due 2030 were the most active issue seen moving in the secondary market about an hour into the session on $7 million-plus of trading.

The bonds climbed more than 5 points on $14 million of paper changing hands Monday.

NIO’s 3.875% convertible notes due 2029 also bucked up to a 101 handle over the morning after picking up over 1.5 points in lighter supply totaling $3 million.

The issue went out Monday more than 6 points better.

Secondary action was busier Tuesday morning with over $111 million of volume a little more than hour into the session, up from less than $75 million of convertible bonds seen traded around the same period on Monday.

Stocks were all moving higher as the session got underway.

The S&P 500 index was up 0.47%, the Dow Jones industrial average improved 0.58%, the Nasdaq rose 0.49% and the Russell 2000 index jumped 1.65%.

Also early Tuesday, PG&E Corp.’s 4.25% secured convertible notes due 2027 had some secondary interest with $4 million of paper traded and the bonds up more than 0.25 point.

“PG&E came out of the gate pretty strongly at issuance, and it’s maintained it,” a source said.

NIO moves up

NIO’s 4.625% convertible notes due 2030 climbed over 2.5 points on $7 million-plus of trading early Tuesday to higher than 101.5 versus an equity price of $8.73, a source said.

The bonds added more than 5 points on $14 million of paper changing hands Monday.

NIO’s 3.875% convertible notes due 2029 also rose more than 1.5 points to around the 101.5 area with an equity price of $8.62 over the morning on $3 million of trading.

The issue went out Monday more than 6 points better on nearly $23 million of paper traded.

NIO reported Monday that it entered into a share subscription agreement with CYVN Holdings LLC through its Abu Dhabi-based investment vehicle CYVN Investments RSC Ltd. investing $2.2 billion in cash to subscribe for 294 million new shares of class A stock at a share price of $7.50 in a deal expected to close next week.

Following the latest December investment, CYVN will own around $20.1% of NIO’s stock.

The Shanghai-based smart electric vehicle manufacturer previously reported that in July it received a $738.5 million equity investment from CYVN, which also acquired an aggregate $350 million of NIO class A shares from an affiliate of Tencent Holdings Ltd.

NIO’s common stock traded 4.79% higher early Tuesday at $8.75 in heavy activity.

PG&E stronger

PG&E’s 4.25% secured convertible notes due 2027 traded Tuesday morning more than 0.25 point better at 102.875 versus an equity price of $17.47, a source said.

Volume totaled $4 million in the issue just over an hour after trading opened.

The issue is down from a high 103 handle but has mostly held on to gains.

PG&E sold $2.15 billion of the notes, with the greenshoe exercised, in a deal that priced on Nov. 29.

Common shares were up 1.7% at $17.61 in light trading early Tuesday.

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