Morning Commentary: Tesla convertible bonds improve on Tencent investment; Square backs down

By Stephanie N. Rotondo

Seattle, March 28 – A convertible bond trader reported that the “Tesla Inc. family” was making up the bulk of the day’s trading as of mid-morning on Tuesday.

The activity in Tesla – as well as its SolarCity Corp. subsidiary – came on the heels of news that Chinese technology investor Tencent had picked up a 5% passive stake in the Palo Alto, Calif.-based car manufacturer.

The trader saw the 2.375% convertible notes due 2022 in a “roughly” 104 to 104.25 context.

“Good volume, over $20 million,” he said of the issue.

The trader also noted that parity was up 1.5 points.

“These bonds are up like 3 points, so they are outperforming,” he said.

As for the 1.25% convertible notes due 2021, they were up about 2.5 points.

The trader added that SolarCity’s 2.75% convertible notes due 2018 were unchanged, though some of the other SolarCity securities were trading better.

Tesla’s stock (Nasdaq: TSLA) was meantime up more than 2% on the investment news.

Aside from Tesla, Square Inc.’s 0.375% convertible notes due 2022 were active but perhaps a touch weaker on the day.

A trader pegged the paper at 102.5 bid, 103 offered.

The underlying equity (NYSE: SQ) was down nearly 1.5% at mid-morning.

The declines came as the credit card payments company led by Twitter’s Jack Dorsey launched its services in the United Kingdom.

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