NetSuite convertibles rise on Oracle takeover news; Blucora retreats on financial results

By Stephanie N. Rotondo

Seattle, July 28 – Another round of takeover and earnings news was helping to push around convertible bonds on Thursday.

NetSuite Inc.’s convertible bonds – and stock – got an upward push by news the cloud software provider was being acquired by Oracle Inc. for $9.3 billion. That takeover announcement came on the heels of Sequenom Inc.’s merger with Laboratory Corporation of America Holdings on Wednesday, which sent Sequenom’s debt up to par from levels around 60 previously.

In earnings news, Blucora Inc. reported its second-quarter results. While the numbers were improved overall, a trader said they still failed to meet analysts’ expectations. As a result, the converts traded “down on delta.”

Extra Space Storage Inc. meantime put out its quarterly results late Wednesday. Come Thursday trading, the convertibles were trading lower, as was the equity underlying the bonds.

Away from takeover- and earnings-driven names, Blackhawk Network Holdings Inc.’s $500 million of 1.5% convertible senior notes due 2022 were off a touch as the company said its greenshoe had been fully exercised.

The bonds slipped just over half a point to 103.415, according to a market source. The stock fell 32 cents to $35.67.

The company priced the $460 million deal on July 21. With the $40 million greenshoe, total issuance was lifted to $500 million.

NetSuite gains on merger

A trader said NetSuite’s 0.25% convertible notes due 2018 were on the rise after it was announced that Oracle was buying the cloud software provider for $9.3 billion.

The trader placed the issue at 109. That was a gain of over 5 points on the day.

As for the stock, it was up $16.84, or 18.39%, at $108.41.

Oracle is paying $109.00 per share for the company. That represents a 19% premium over Wednesday’s closing share price.

The deal is expected to close in the third quarter.

NetSuite also announced its second-quarter earnings on Thursday, showing a 30% gain in revenue, at $30.8 million. But despite that improvement, net loss widened to $37.7 million from $32.3 million.

On an adjusted basis, the company saw a $6.6 million profit, or 8 cents per share.

Analysts polled by Thomson Reuters had forecast EPS of 3 cents.

Blucora down on delta

Blucora’s 4.25% convertible notes due 2019 “kind of moved down on delta,” a trader said, as the stock was “tanking” post-earnings.

He said the bonds moved down in early trading to 92 from 94 previously.

The bonds eventually closed somewhere in the middle, with one source placing the issue at 93.125.

As for the equity, it was off $2.60, or 20.02%, at $10.39.

The company saw its net income rise to $23.42 million, or 55 cents per share, from $14.57 million, or 35 cents per share the year before. Revenues for the second quarter improved 7.5% to $120.11 million.

However, a trader said the stock’s reaction was due to the company missing revenue expectations.

“I don’t think this effects the credit at all,” the trader said.

Blucora is a Bellevue-based provider of technology-enabled financial solutions to consumers, small businesses and tax professionals.

Extra Space squeezed

Investors were also reacting to Extra Space Storage’s earnings, which came out late Wednesday.

Come Thursday, the company’s 3.125% convertible notes due 2035 were trading down 2.5 points to just north of 110, according to one source.

The stock meantime declined $3.93, or 4.37%, to $85.97.

For the second quarter, Extra Space posted funds from operations of 91 cents per share. On an adjusted basis, FFO was 94 cents per share.

For the year, the storage solutions company is expecting to see FFO of $3.71 to $3.78 per share.

Mentioned in this article:

Blackhawk Network Holdings Inc. Nasdaq: HAWK

Blucora Inc. Nasdaq: BCOR

Extra Space Storage Inc. NYSE: EXR

NetSuite Inc. NYSE: N

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