Convertibles off to a ‘Monday’ opening; Pure Storage, Zendesk below par; Tesla active

By Abigail W. Adams

Portland, Me., April 9 – The convertibles space was off to a “Monday” start with not much on the tape early in the session, a market source said. Trading volume remained low as the day progressed with $225 million on the tape by late afternoon.

Pure Storage’s 0.125% convertible notes due 2023 remained the major volume mover of the day. The new notes, which made their market debut on April 5, were trading below par during Monday’s session.

However, the notes were trading in-line dollar neutral, a market source said.

Zendesk Inc.’s recently priced 0.25% convertible notes due 2023 were also seen below par in active trading on Monday.

Tesla Inc.’s three tranches of convertible notes remained active on the tape with the notes returning to their prior trading levels before the sell-off in late March.

The borrow on Tesla stock is expensive, making it hard to take advantage of the volatility, a market source said.

While slow to trade on Monday, Pacira Pharmaceuticals Inc.’s 2.375% convertible notes due 2022 were up about 1 point dollar neutral on Friday as stock was volatile amid confusion surrounding FDA approval for the expanded use of the pharmaceutical company’s non-opioid medication Exparel.

Pure Storage in-line

Pure Storage’s 0.125% convertible notes remained the major volume mover of the secondary space their third day in the market.

After trading as high as 102 on their market debut April 5, the 0.125% convertible notes due 2023 dropped below par on an outright basis during Monday’s session.

With the notes moving on about a 60% delta, the move was in-line dollar neutral, a market source said.

The 0.125% notes were seen trading in the 99.375 to 99.75 range on Monday. Pure Storage stock closed Monday at $18.35, a 0.7% decrease. Stock dropped more than 6% on Friday.

Pure Storage priced an upsized $500 million of five-year convertible notes prior to the market open on Thursday.

The notes were in high demand during the subscription process and their first day on the market but traded down on Friday as the Mountain View, Calif.-based data flash storage company’s stock dropped.

Zendesk’s recently priced 0.25% convertible notes due 2023 were also seen below par in active trading.

The 0.25% notes were seen trading between 99.5 to 99.625 during Monday’s session. Zendesk stock closed Monday at $45.17, an increase of 0.18%.

The San Francisco-based customer service software company priced $500 million of the 0.25% convertible notes on March 16. The notes have wavered between just above and just below par since hitting the market.

Tesla active

Tesla’s three tranches of convertible notes were again active on the tape on Monday with the notes returning to the levels seen prior to the sell-off in late March.

Tesla’s 0.25% convertible notes due 2019 traded in the 103 to 104 range in scattered trades on Monday.

Tesla’s 1.25% notes due 2021 traded to a high of 104.8 before closing the day at a low of 102.361, according to Trace data.

Tesla’s 2.375% convertible notes due 2022 traded in a range of 109 to 110 after reaching a high of 111 on Friday.

Tesla stock remains volatile and traded as high as $309.50 before closing Monday at $289.64, a decrease of 3.23%.

While stock has been volatile, the borrow is “crummy again,” a market source said. Without a good rate on the borrow, it is difficult to create a position to take advantage of the volatility.

Pacira up

While there was limited trading activity on Monday, Pacira Pharmaceuticals’ 2.375% convertible notes due 2022 were up about 1 point dollar neutral on Friday.

Volatility in the company’s stock on Friday was caused by uncertainty surrounding FDA approval for the expanded use of the pharmaceutical company’s non-opioid medication Exparel.

It appeared that expanded use of the medication received approval on Friday. However, notice of approval was taken off the FDA website after the initial announcement, a market source said.

An FDA advisory panel previously voted against recommending the expanded use of Exparel in February.

It was not until late in the trading session that confirmation of approval was received.

While the 2.375% convertible note was seen up about 0.75 point to 1 point dollar neutral on Friday, the volatility of stock made it quick to change.

“That one’s been kind of wild in the space,” a market source said.

The 2.375% notes were seen trading just north of 95 in scattered trades on Monday. Pacira stock closed the session at $34.50, an increase of 3.6%.

Mentioned in this article:

Pacira Pharmaceuticals Nasdaq: PCRX

Pure Storage NYSE: PSTG

Tesla, Inc. Nasdaq: TSLA

Zendesk, Inc. NYSE: ZEN

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