Ctrip.com convertibles wane on exchange news; Tesla bonds give up recent gains, lock-up ends

By Stephanie N. Rotondo

Seattle, June 15 – Ctrip.com International Ltd.’s convertible bonds were in focus on Thursday as the company announced a privately negotiated exchange of $327.2 million of its 1.25% convertible notes due 2018.

In response, the company’s 1% convertible notes due 2020 were sliding, losing almost 2 points to trade around 113.25, according to a market source.

At another desk, the convertibles were pegged at 113.5 bid, 114 offered.

The company’s equity, for its part, declined $1.12, or 2.08%, to $52.64.

Under the terms of the exchange, holders of the 1.25% convertibles will receive American Depositary Shares equal to 0.125 ordinary Ctrip.com shares, at a conversion rate of $39.19 each.

Meanwhile, tech-linked names were under pressure again following a two-day rebound that was preceded by a two-day sell-off.

Tesla Inc.’s paper was particularly active, even as the convertibles erased most of their Wednesday gains.

At day’s end, a source saw the 0.25% convertible notes due 2019 in a 116.5 to 116.75 range, while the 1.25% convertible notes due 2021 were placed in a 117.5 to 118 context.

Earlier in the day, the 1.25% convertibles were seen off over 1.5 points at 117.125. The 0.25% convertible notes were down over a point at 116.375.

As for the company’s shares, they were down $5.32, or 1.4%, at $375.34.

The equity was off over 3% in earlier trading.

Tesla’s stock started to gain ground on Tuesday following an upgrade from Berenberg. The convertibles followed suit. Come Wednesday, the upward trend continued, as market commentator Jim Cramer likened the automaker to tech giants such as Amazon and Netflix.

However, it was reported on Thursday that Tesla – which is ramping up production on its Model 3 vehicle – is burning cash quickly and also has high debt, due in part to its somewhat recent acquisition of SolarCity.

Additionally, a 90-day lockup period following the company’s $402.5 million stock offering in March ended Thursday. Given that the company is in need of more cash, that makes an additional capital raise very likely. The only questions are when and how the raise will occur.

Should Tesla opt for another equity offering, that could result in a hefty drop in the stock price, which would likely also cause the convertibles to give up some ground.

Mentioned in this article:

Ctrip.com International Ltd. Nasdaq: CTRP

Tesla Inc. Nasdaq: TSLA

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