Morning Commentary: Veoneer convertibles expand on debut; Tesla notes active, unchanged

By Abigail W. Adams

Portland, Me., May 23 – As equities launched the day deep in the red on fears of a protracted trade war, new convertibles paper remained in focus and continued to perform well in the secondary space.

Veoneer Inc. priced an upsized $180 million of five-year convertible notes after the market close on Wednesday at the midpoint of talk with a coupon of 4% and an initial conversion premium of 27.5%.

Price talk was for a coupon of 3.75% to 4.25% and an initial conversion premium of 25% to 30%, according to a market source.

The deal priced concurrently with a $420 million, or 24 million share, common stock offering, which priced at $17.50 per share.

The common stock offering carries a greenshoe of $63 million. The initial size of the common stock offering was $350 million with a greenshoe of $52.5 million.

The new paper was expanding on debut, a market source said.

The 4% convertible notes traded as high as 102.25 prior to the market open.

They were trading in a wide range of 101.5 to 102.5 early in the session and were expanded dollar-neutral, a source said.

“They did well,” a source said.

Veoneer stock was trading at $17.59, a decrease of 2.06%, shortly before 11 a.m. ET.

While Veoneer’s new paper was active in the secondary space, IAC/InterActive Corp.’s newly priced tranches were slow to trade.

The 0.875% exchangeable notes due 2026 were changing hands just below par with stock off early in the session. However, only a couple prints were on the tape early in the session, a market source said.

The 2% exchangeable notes due 2030 were also just south of par and were even less active than the shorter duration notes.

“Everything that needed to get done got done yesterday,” a market source said.

IAC stock was trading at $224.86, a decrease of 0.69%, shortly before 11 a.m. ET.

Outside of the new paper, Tesla Inc.’s convertible notes remained major volume movers in the secondary space.

While active, the notes were largely unchanged early in Thursday’s session after each tranche saw a 0.5 point contraction on Wednesday.

Tesla’s recently priced 2% convertible notes due 2024 traded as low as 86.5 on Thursday.

The 1.25% convertible notes due 2021 dropped to 90.

The 2.375% convertible notes due 2022 were changing hands at 90.375.

Tesla stock was changing hands at $195.77, a 1.58% increase, shortly before 11 a.m. ET.

The soon-to-mature SolarCity Corp. convertible notes were also active on Thursday.

The 1.625% convertible notes due Nov. 1, 2019 were changing hands at 94.5 early in Thursday’s session with the yield 15.4%.

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