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Morning Commentary: Tesla’s 0.25% convertibles ‘getting interesting’; secondary quiet
By Abigail W. Adams
Portland, Me., Dec. 7 – The convertibles secondary space remained quiet early in Friday’s session with the roller coaster in equities continuing.
While the Dow Jones industrial average was green at the market open it quickly reversed course and was down about 200 points shortly before 11 a.m. ET.
While the volatility has been great, credit remains shaky with market players nervous, a source said.
“When you start hearing recession talk, it puts a damper on everything,” the source said. And the recession chatter has started to increase from a variety of sources.
While the overall market continued to struggle, Tesla Inc.’s stock continued to “rock and roll,” a source said.
After flirting with the “magic number,” or the $359.87 conversion price on its 0.25% convertible notes due March 1, 2019, last week, Tesla stock closed Thursday above it and continued to see gains early Friday.
Tesla’s 0.25% convertible notes were the focus of trading early Friday. “Those notes are getting interesting,” a source said.
The notes traded up to 110 early Friday and were expanded dollar-neutral. Parity on the 0.25% notes is now about 104, a source said.
While less active, Tesla’s 1.25% convertible notes due 2021 were also on the tape with the notes trading around 119.5. They appeared to be moving in line on a dollar-neutral basis.
Tesla stock was up another 2.5% early Friday to $372.14 after closing Thursday at $363.06.
Tesla notified holders on Thursday that the 0.25% convertible notes would be settled half in cash and half in stock if the notes are converted at maturity.
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