Convertibles trading volume light; Tesla surges; short-dated SolarCity bonds jump

By Abigail W. Adams

Portland, Me., July 3 – Wednesday’s truncated session was an uneventful day in the convertibles secondary space with light trading volume and few notable movements, sources said.

There was about $151 million on the tape shortly before the market close with few names seeing concentrated trading activity.

However, there was one exception – Tesla Inc.

Tesla’s convertible notes returned to focus on Wednesday and surged on both an outright and dollar-neutral basis as stock soared on the heels of a record number of car sales for the second quarter.

While volume was light, Wright Medical Group Inc.’s convertible notes were under watch with one issue seeing a large dollar-neutral move on Tuesday and another issue approaching maturity.

Tesla’s surge

Tesla again occupied the headlines on Wednesday, but this time the headlines were positive and sent the embattled electric car manufacturer’s stock and convertible notes soaring.

Tesla’s 2% convertible notes due 2024 jumped 4 points outright on news the company had set a new record for the number of cars delivered during the second quarter.

The 2% notes traded up to 102.5 on Wednesday after largely languishing below par since shortly after pricing in early May.

They gained 1.25 points dollar-neutral, sources said.

More than $13 million of the bonds were on the tape heading into the market close.

While less active, Tesla’s other tranches of convertible notes were also on the rise.

Tesla’s 2.375% convertible notes due 2022 jumped 3 point outright to 102. The notes improved about 0.75 point dollar-neutral.

The notes have also languished below par since May when Tesla stock cracked.

The 1.25% convertible notes due 2021 were up about 0.5 point dollar-neutral, a source said.

While still well below its 52-week high, Tesla stock soared on Wednesday after the company reported a record number of car sales for the second quarter.

Stock traded as high as $241.57 early in the session before coming in to close the day at $234.9, an increase of 4.61%.

Tesla reported the delivery of 95,200 cars for the second quarter, beating analyst expectations for deliveries of 91,000 cars.

While volume was light, SolarCity Corp.’s soon-to-mature 1.625% convertible notes due Nov. 1, 2019 were also posting gains as investor confidence in the company returned.

The notes jumped 2 points outright to 98.25, according to a market source.

Wright Medical eyed

While trading activity surrounding the notes was light, market players were eyeing Wright Medical’s convertible notes after a large move in the company’s stock on Tuesday.

Wright Medical’s 1.625% convertible notes due 2023 continued to improve dollar-neutral with stock again off on Wednesday.

The notes saw a large 1.25 point expansion on Tuesday as they were quoted down on an outright basis, according to a market source.

While the notes were slow to trade, they shaved off 5 points outright on Tuesday and were quoted at 104.875 at the market close.

Wright Medical’s 2% convertible notes due Feb. 15, 2020 were also trading down outright as stock sank.

The 2% notes were down another 2 points to 102 on Wednesday.

They were trading around 110 in the run up to Tuesday’s session only to close the day around 104.

The maturity of the notes is less than one year away with the company most likely going to redeem them at par, a market source said.

Wright Medical stock closed Wednesday at $26.94, a decrease of 1.46%, after falling 8.68% on Tuesday.

Stock was under pressure after RBC revised its price target for the stock to $34 from $36 due to decreased usage of the Cartiva implants to treat arthritis in the big toe.

Mentioned in this article:

Tesla Inc. Nasdaq: TSLA

Wright Medical Group Inc. Nasdaq: WMGI

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