Infinera hits the market, expands on debut; Tesla contracts; Perficient, Retrophin gain

By Abigail W. Adams

Portland, Me., Sept. 7 – The convertibles secondary space was active on Friday with new paper from Infinera Corp. leading the charge in trading activity.

The new paper was volatile on an outright basis early in the session but settled in the afternoon and was expanding on swap, sources said.

Tesla Inc.’s convertible notes returned to focus and were contracting on a dollar-neutral, or hedged, basis after a fresh batch of headlines shook investor confidence in the embattled electric car manufacturer.

After lagging their issue price on their market debut, Perficient Inc.’s 2.375% convertible notes due 2023 bounced back to par on Friday although the notes remained largely flat dollar-neutral.

Retrophin Inc.’s 2.5% convertible notes due 2025 continued their expansion on Friday after a multi-point dollar-neutral expansion on their market debut Thursday.

Okta Inc.’s 0.25% convertible notes due 2023 jumped more than 20 points outright as stock soared after a second-quarter earnings beat.

Software companies continue to be the outperformers in the convertibles space, a market source said.

Infinera expands

Infinera priced an upsized $350 million of six-year convertible notes prior to the market open on Friday at the midpoint of talk with a coupon of 2.125% and an initial conversion premium of 30%.

Price talk had been for a coupon of 1.875% to 2.375% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The new paper was volatile early in the session with outright trades as high as 101.5 soon after the opening bell and as low as 99.25.

The volatility in the trading prices was largely due to the upsized offering, a market source said. “It gets a lot sloppier with the size increase,” the source said. “That’s a lot more stock that has to trade.”

Due to the upsized offering, there was more flipping of the notes, the source said.

The notes settled around par in the afternoon. They were trading well on swap, a market source said.

The notes were seen expanded about 2 points dollar-neutral, sources said.

Infinera stock closed Friday at $7.24, a decrease of 4.67%.

Tesla contracts

Tesla’s convertible notes returned to focus on Friday and were down on both an outright and dollar-neutral basis as investors responded to the latest news surrounding the company.

Tesla’s 0.25% convertible notes due 2019 dropped about 2 points outright.

They were seen at 97.5 bid, 98 offered versus a stock price of $262.00 in the late afternoon. The 0.25% notes fared the best dollar-neutral compared to the other tranches.

They were contracted 0.375 point on hedge, a market source said.

Tesla’s 1.25% convertible notes due 2021 dropped about 6 points outright. They were seen at 95 bid, 95.5 offered versus a stock price of $262.00 and were contracted 1.5 points dollar-neutral.

Tesla’s 2.375% convertible notes due 2022 were down about 4 points outright. They were seen at 101.25 bid, 102 offered versus a stock price of $262.00 and were contracted 1 point dollar-neutral, a market source said.

Tesla stock closed Friday at $263.24, a decrease of 6.3%.

Meanwhile, SolarCity Corp.’s 1.625% convertible notes due 2019, which are guaranteed by Tesla, “are trading like people think they’re going to go bankrupt,” a market source said.

The notes were down 1.25 points outright. They were seen at 90.25 bid, 90.75 offered.

The notes are a yield-to-maturity play and do not trade in relation to stock, sources said. The notes were trading with an almost 11% yield to maturity.

SolarCity’s 2.75% convertible notes due Nov. 1, 2018 did not trade on Friday with their last level 98.75.

The notes had drifted out of focus in recent days after a wild ride in August caused by CEO Elon Musk’s twitter proclamation about taking the company private at $420 a share with funding secured. The take private initiative was later abandoned with funding not secured.

Investor confidence in the company was again shaken on Friday after news broke that Tesla’s chief accounting officer and head of human resources resigned.

The recently appointed and now former chief accounting officer Dave Morton quit over concern about Musk’s handling of accounting details surrounding the take private initiative, CNBC reported.

The high-profile resignations hit the headlines as news stories also swirled around Musk for smoking marijuana during a podcast interview.

Day 2

While trading activity surrounding new paper from Retrophin and Perficient tapered on Friday, both notes were seen improved.

Perficient’s 2.375% convertible notes due 2023 traded back up to par on Friday after closing Thursday in the 98 area, sources said.

While improved outright, the notes remained flat on a dollar-neutral basis, a market source said.

Perficient’s 2.375% convertible notes struggled on their market debut on Thursday, trading well below their issue price with stock down almost 5%.

Perficient stock closed Friday at $29.66, an increase of 3.63%.

After a strong performance out of the gate, Retrophin’s 2.5% convertible notes due 2025 continued to improve on Friday.

The notes were seen at 103.25 bid, 103.5 offered in the late afternoon.

They were expanded another 0.25 point dollar-neutral, a market source said. The notes were expanded 2.5 points to 3 points dollar-neutral on their market debut on Thursday.

Retrophin stock closed Friday at $29.09, an increase of 0.38%.

Okta soars

Okta’s 0.25% convertible notes due 2023 are among the software deals that priced in 2018 that have outperformed, a market source said.

The 0.25% notes were up more than 20 points outright as stock soared after a large earnings beat. The notes were quoted at 160 at the market close on Friday, according to a market source. They closed Thursday at 138.

Okta stock was up more than 20% in intraday trading and closed the day at $71.92, an increase of 19.47%.

The stock soared after Okta reported a second-quarter earnings beat and raised its forward guidance. Okta reported a non-GAAP loss per share of 15 cents versus analyst expectations for a loss per share of 19 cents.

The company raised its future guidance for 2019 to revenue of $372 million to $375 million and a non-GAAP loss per share of 48 cents to 46 cents.

Guidance for 2019 had been for revenue of $353 million to $357 million and a non-GAAP loss per share of 58 cents to 54 cents.

Mentioned in this article:

Infinera Corp. Nasdaq: INFN

Okta Inc. Nasdaq: OKTA

Perficient Inc. Nasdaq: PRFT

Retrophin Inc. Nasdaq: RTRX

Tesla Inc. Nasdaq: TSLA

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.