Energy names sink with drop in oil prices; Tesla edges up; Synaptics, Teladoc notes on tap

By Rebecca Melvin

New York, June 20 – Energy names dropped outright and on a dollar-neutral, or hedged, basis on Tuesday as a slide in oil prices took West Texas Intermediate crude oil for July delivery down another 2.2% to $43.23 per barrel.

“It’s all oil today. With oil at 42 or 43, people are shifting their exposure, and either adding or reducing depending on what the PMs want to do,” a New York-based trader said, referring to portfolio managers.

Weatherford International plc was on a short list of energy names in focus. The Switzerland-based oil and gas equipment and services company’s 5.875% exchangeable senior notes due 2021 were quoted at 101.25 bid, 101.75 offered, which was down from 103 and change on Monday, and versus the underlying shares, which were off 13 cents, or 3.2%, at $3.95 on the day.

On April 28, the Weatherford exchangeable was trading at 119.5 to 121.5 with the underlying shares at $5.77.

Other energy convertibles in focus included those of Nabors Industries Ltd., Chesapeake Energy Corp. and SM Energy Co.

Away from energy, volumes in the convertibles market were fairly light. There was some profit-taking in the technology sector, as investors sold some issues that had recently gained.

“Tech was a little weaker today. People are starting to get nervous that the tech run is getting ahead of itself,” and tech bellwethers were under pressure, a second New York-based trader said.

There was also some trading in the health care and pharma sectors, but “everything else held,” the trader said.

Priceline Group Inc. saw its 0.35% convertibles contract about 0.125 point. Microchip Technology Inc. also saw a small move in one of its 1.625% convertible tranches. Those looked to have come in 0.125 point to 0.25 point, a trader said.

But Tesla Inc. edged slightly higher on swap, called better by 0.125 point on a dollar-neutral basis by a New York-based trader.

Clovis Oncology Inc., which was the “nom du jour” on Monday after the company’s stock popped nearly 50% on positive trial data, moved up a little further in line with the underlying shares on Tuesday, but it traded only a few times.

The Clovis 2.5% convertibles due 2021 traded at 166.5, which was up 4.5 points on an outright basis from late Monday. Clovis shares were up another 2% at $89.82.

After the market close Synaptics Inc. launched a deal late Tuesday that was slated to price ahead of the market open on Wednesday for $450 million of five-year convertible notes talked to yield 0.25% to 0.75% with a 32.5% to 37.5% initial conversion premium.

Wells Fargo Securities LLC is the bookrunner of the Rule 144A offering, which has a $50 million greenshoe.

In addition, Teladoc Inc. launched late Tuesday $200 million of convertible notes due 2022 talked to yield 3% to 3.5% with an initial conversion premium of 27.5% to 32.5%.

Jefferies & Co. is bookrunner of the Rule 144A deal, which was seen pricing after the market close on Wednesday.

Synaptics’ common shares closed higher on the day, up 76 cents, or 1.4%, to $55.11. In after-hours trade the shares were little changed.

Teladoc’s common shares closed down $3.15, or 9%, to $32.65 on Tuesday. In after-hours trading action the shares lost another 65 cents, or 2%.

Energy comes in

“It was a tough day across the energy landscape,” a New York-based trader said.

Weatherford’s exchangeable bonds and many other energy-related convertible names slid better than a point on a dollar-neutral basis on Tuesday, a New York-based trader said.

Nabors’ 0.75% convertibles due 2024 traded down fractionally to 80.265, according to Trace data. But those convertibles looked to be fully valued compared with the straight debt of the Bermuda-based oil and natural gas drilling services company.

“Everything came in with oil collapsing. Investors are throwing in the towel,” the trader said.

To the extent that these names were high yield, the straight debt was wider and the convertibles are in in conjunction with the credit widening, the trader said.

The drop on a dollar-neutral basis was about a point to 1.25 points.

“I am not surprised by the magnitude of the moves,” he said.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Nabors Industries Ltd. NYSE: NBR

Clovis Oncology Inc. Nasdaq: CLVS

Microchip Technology Inc. Nasdaq: MCHP

Priceline Group Inc. Nasdaq: PCLN

SM Energy Co. NYSE: SM

Synaptics Inc. Nasdaq: SYNA

Teladoc Inc. Nasdaq: TDOC

Tesla Inc. Nasdaq: TSLA

Weatherford International plc NYSE: WFT

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