Colfax tangible equity units continue to gain; MondoDB expands; Microchip contracts

By Abigail W. Adams

Portland, Me., Jan. 10 – The convertibles secondary space remained firm on Thursday although with lighter volume than the space had seen earlier in the week, sources said.

With equity markets wavering between gains and losses during Thursday’s session, high beta names continued to be well bid – a theme in the secondary space throughout the week.

The secondary space continues to look to the primary for what promises to be a solid year for new deal activity.

The partial government shutdown, which has ensnared the Securities and Exchange Commission, may be putting a damper on new deal activity, a market source said.

Rule 144A deals should sidestep the issue. However, M&A financing deals may be holding back until the partial shutdown is resolved, a source said.

While the primary market was off to a slow start, Colfax Corp.’s new 5.75% tangible equity units due 2022 remained active and continued to post gains their second day in the secondary space.

While a different product than a convertible bond, the performance of Colfax’s new tangible equity units was a solid start to the year, a source said.

Microchip Technology Inc.’s 1.625% convertible notes due 2027 were among the most actively traded issues in the secondary space with the notes contracting as stock gained during Thursday’s session.

MongoDB Inc.’s 0.75% convertible notes due 2024 expanded as stock sank after Amazon launched a competing service.

Tesla Inc.’s A and B tranche convertible notes were also active and slightly improved with investors feeling more confident in the name.

Colfax gains

Colfax’s new 5.75% tangible equity units due 2022 continued to post gains on Thursday, marking a strong start for new deal activity in the new year.

The par of $100 units traded as high as 105.25 early in Thursday’s session. They were seen trading at 105.25 versus an equity price of $21.88 later in the afternoon.

The units were moving largely in line dollar-neutral on Thursday after a 2-point expansion on Wednesday.

More than 520,000 of the units traded during Thursday’s session.

Colfax common stock closed Thursday at $21.73, an increase of 2.71%.

Microchip contracts

Microchip’s 1.625% convertible notes due 2027 were among the most actively traded issues in the secondary space with the notes contracting slightly, a market source said.

The 1.625% convertible notes due 2027 were changing hands just shy of 103 versus an equity price of $76.52, according to a market source.

The notes were up about 1 point outright and were contracted about 0.25 point dollar-neutral, sources said.

More than $20.5 million of the bonds were on the tape by the late afternoon.

Microchip stock closed Thursday at $76.62, an increase of 1.02%.

MongoDB expands

MongoDB’s 0.75% convertible notes due 2024 were expanding dollar-neutral as the bonds dropped alongside stock during Thursday’s session.

The notes were down 9.5 points outright but were expanded 0.5 point on hedge, sources said.

The 0.75% notes were seen changing hands at 131.875 versus an equity price of $78.00. While the notes were well bid for, there were not many sellers in the market, a market source said.

“It’s been all buyers, but there’s no real supply,” the source said. “There’s not a ton of trading.”

About $6 million of the bonds were on the tape by the late afternoon.

MongoDB stock traded as low as $72.91 on Thursday but pared its losses to close the day at $75.20, a decrease of 13.18%.

MongoDB stock took a hit on Thursday after Amazon Web Services announced competing cloud-based database software.

Tesla active

Tesla’s A and B tranches of convertible notes saw a fresh round of activity on Thursday with investors again feeling confident about the prospects for the electric car manufacturer.

Tesla’s soon-to-mature 0.25% convertible notes due March 1, 2019 were trading hands at 103.875 versus an equity price of $341.34 in the late afternoon.

More than $10 million of the bonds were on the tape.

Tesla’s 1.25% convertible notes due 2021 were changing hands at 114.375 versus a stock price of $324.62 with more than $12 million of the bonds on the tape by the late afternoon.

The notes were expanded about 0.25 to 0.375 point dollar-neutral, a market source said.

Tesla stock traded to a low of $331.00 and a high of $345.00 before closing the day at $344.97, an increase of 1.9%.

After dropping last week following a price cut to its automobiles, Tesla stock has been on the rebound since Monday.

Investors were feeling better about the name, a market source said.

Tesla stock will be closely watched over the next two months as the maturity of the 0.25% convertible notes approaches.

Tesla has said the 0.25% convertible notes would be settled half in cash and half in stock if the notes are convertible at maturity.

The conversion price on the 0.25% notes is $359.87.

Mentioned in this article:

Colfax Corp. NYSE: CFX

Microchip Technology Inc. Nasdaq: MCHP

MongoDB Inc. Nasdaq: MDB

Tesla Inc. Nasdaq: TSLA

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