Morning Commentary: Carvana in focus on exchange offer; Luminar convertible notes up

By Cristal Cody

Tupelo, Miss., July 19 – With the convertibles primary market remaining quiet, market participants focused early Wednesday on Carvana Co.’s high-yield bond exchange announcement.

Carvana’s bonds “have been creeping up, but the stock was up 12 points pre-opening,” a source said.

Carvana’s stock closed at $39.80 on Tuesday and climbed to as high as $56 before the market opened on Wednesday and climbed as high as $56.87 over the morning.

“These shares were trading around $10 three months ago,” the source noted. “The bonds had gotten down to as low as 50 cents on the dollar, and even through they’re not convertible, a lot of the convertible players flow over to junk and specially distressed situations.”

Carvana, which intends to eliminate a major portion of the equity in the exchange, also announced it had its best quarter on record.

Stocks were stronger in early trading.

The S&P 500 index rose 0.45%, the Nasdaq headed 0.52% higher, the Dow Jones industrial average was 0.45% better and the Russell 200 index was up 0.5%.

Trading was fairly quiet in the convertibles space over the morning with about $72 million of notes trading, a source said.

On Tuesday, $1.66 billion of convertibles traded, according to Trace data.

Meanwhile early Wednesday, Luminar Technologies, Inc. topped secondary action over the morning after a class action lawsuit against the company was announced.

Luminar’s 1.25% convertible notes due 2026 added about 1.5 points on $11 million of trading as the session got underway.

BridgeBio Pharma, Inc.’s convertible notes were among Tuesday’s top traded convertible bonds and early Wednesday continued to gain in lighter trading.

Carvana higher

Carvana on Wednesday released its second-quarter results and said it had its best quarter on record.

The company also filed to sell $1 billion of its class A common stock.

But Carvana’s announcement of an exchange offer and agreement to eliminate more than 83% of its senior notes and reduce its total outstanding debt by more than $1.2 billion captured much of the market’s focus, sources reported.

Carvana’s 10.25% senior notes due 2030 were trading about 1.75 points better over the morning at 84.

The issue has rebounded from trading with a handle in the low 50s in March.

Carvana’s stock (Nasdaq: CVNA) rallied around 34% to $53.72 in early heavy secondary trading. Volume totaled around 75 million shares, compared to the average 28 million traded.

Luminar gains

Luminar’s 1.25% convertible notes due 2026 picked up about 1.5 points to trade around 71.75 and an 11.5% yield on $11 million of trading early Wednesday, a source said.

The equity was priced at $7.27.

Common shares (Nasdaq: LAZR) were last seen late in the morning 5.39% higher at $7.61.

Luminar’s bond is an equity sensitive issue, according to the market source.

The Gross Law Firm announced in a press release Wednesday that it notified Luminar shareholders of a class action lawsuit with the firm looking for a lead plaintiff by the July 25 deadline.

The lawsuit alleges that during the class period from Feb. 28 through March 17, the company issued materially false and/or misleading statements or failed to disclose that “Luminar had misappropriated an image of a competitor's photonic integrated circuit to market the company's own products and capabilities.”

BridgeBio Pharma up

BridgeBio Pharma’s 2.5% notes due 2027 hit 107.75 with a 0.36% yield in early trading on Wednesday, up more than 0.75 point from Tuesday, a source said.

Trading was light at $2.6 million.

The equity (Nasdaq: BBIO) was priced slightly better at $32.73.

BridgeBio Pharma’s stock was last seen late morning 6.03% higher at $34.45.

The convertible notes went out Tuesday 1 point higher at 106.946 and a 0.576% yield, while the equity was priced at $32.7.

BridgeBio Pharma’s paper kicked off the rally on Monday with its stock closing at nearly double Friday’s closing price, from $18.22 on Friday to over $30 on Monday and Tuesday.

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