Tesla convertibles mixed; Guess? gains outright, holds on swap; ServiceNow, WWE active

By Abigail W. Adams

Portland, Me., April 25 – Earnings-related news spurred activity in the convertibles secondary space on Thursday with several names seeing movement although in opposite directions.

Tesla Inc.’s convertible notes were mixed as stock hit a new 52-week low after a large earnings miss.

However, SolarCity Corp.’s 1.625% convertible notes due Nov. 1, 2019 were on the rise in active trading with investors showing confidence the notes would be paid off with a new capital raise.

Guess? Inc.’s 2% convertible notes due 2024 continued to see gains on an outright basis.

While the notes held onto their dollar-neutral expansion, they were contracted from the heights reached on Wednesday.

ServiceNow Inc.’s 0% convertible notes due 2022 skyrocketed on an outright basis on Thursday with the bonds broaching double par. However, the notes were slightly contracted dollar-neutral.

World Wrestling Entertainment Inc.’s 3.375% convertible notes due 2023 were “body-slammed” on an outright basis but gained dollar-neutral following earnings, a market source said.

Tesla’s new low

Tesla’s convertible notes were mixed on Thursday as stock hit a new 52-week low following a large earnings miss.

While Tesla’s 1.25% convertible notes due 2021 were slightly expanded, the 2.375% convertible notes due 2022 were unchanged to contracted dollar-neutral, sources said.

The 1.25% convertible notes were changing hands at par early in the session and around 99.25 in the mid-afternoon. They were expanded about 0.25 point dollar-neutral, a market source said.

The 2.375% convertible notes due 2022 were changing hands around 105.75 early in the session and around 105 in the mid-afternoon.

Sources saw the notes as either unchanged or contracted about 0.375 point on a dollar-neutral basis.

However, trading of the notes was relatively light.

Tesla stock traded as high as $259 and as low as $246.07 before closing the day at $247.63, a decrease of 4.26%.

From a technical perspective, some are saying that $250 may be the bottom for Tesla stock with players establishing their hedges accordingly, a market source said.

However, with Tesla “you never know,” the source said.

While Tesla’s tranches saw relatively light trading volume, SolarCity’s 1.625% convertible notes due Nov. 1 were making gains in active trading on Thursday.

The notes gained about 0.75 point outright to trade up to 97.

Investors were expressing confidence post-earnings the notes would be paid off via a new capital raise, a market source said.

Tesla reported non-GAAP losses per share of $2.90 for the first quarter versus analyst expectations for losses of $1.15 per share.

Revenue was $4.5 billion versus analyst expectations for revenue of $5.4 billion.

Guess? holds

Guess?’s 2% convertible notes due 2024 largely faded from focus on Thursday after dominating the secondary space on their market debut on Wednesday.

However, the notes continued to post gains on an outright basis.

The notes were changing hands around 103 early in the session and had climbed to 104 by the late afternoon.

While the notes continued to hold onto their 0.5 point expansion, they were down 1 point to 1.5 points from the heights reached on their market debut on Wednesday.

The 2% notes saw a 1.5 point to 2 point dollar-neutral expansion out of the gate on Wednesday but came in toward the market’s close.

Guess? stock closed Thursday at $19.42, a decrease of 1.02%.

ServiceNow contracts

ServiceNow’s 0% convertible notes due 2022 jumped on an outright basis but contracted dollar-neutral as stock soared following an earnings beat.

The 0% convertible notes broached double par in intra-day trading but closed Thursday’s session at 195.35, according to a market source.

While up 12 points outright, they were contracted 0.5 points dollar-neutral.

The deep-in-the-money convertible notes are largely an equity surrogate, sources said.

However, the valuation of the notes is still susceptible to changes in the volatility of the stock, a source said.

ServiceNow’s stock climbed as high as $269.26 during Thursday’s session before closing the day at $260.69, an increase of 7.41%.

ServiceNow beat on both the top and bottom line in its first-quarter earnings report.

The cloud computing company reported earnings per share of 67 cents versus analyst expectations for earnings per share of 54 cents.

Revenue was $789 million versus analyst expectations for revenue of $766.2 million.

WWE’s body slam

While World Wrestling Entertainment’s 3.375% convertible notes due 2023 got “body-slammed” on an outright basis, the notes were expanding dollar-neutral.

The 3.375% notes dropped more than 50 points outright to close the day at 348. They expanded about 0.25 point dollar-neutral, a market source said.

The notes are mostly hedged, a source said.

World Wrestling’s stock plummeted after a first-quarter earnings miss.

Stock closed Thursday at $85.38, a decrease of 13.32%.

World Wrestling reported a loss per share of 11 cents versus analyst expectations for a loss per share of 2 cents.

Revenue was $182.4 million versus analyst expectations for revenue of $199 million.

Mentioned in this article:

Guess? Inc. NYSE: GES

ServiceNow Inc. NYSE: NOW

Tesla Inc. Nasdaq: TSLA

World Wrestling Entertainment Inc. NYSE: WWE

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