Snap convertibles drop below par; SmileDirectClub, SolarEdge notes down outright

By Abigail W. Adams

Portland, Me., May 4 – It was a red day in the convertibles secondary space with the market soft amid the latest pullback in equities.

While equities rallied into the close with the Dow Jones industrial average closing the day up 19 points, or 0.06%, after launching the day down over 200 points, the S&P 500 index closed the day down 0.67%, the Nasdaq Composite down 1.88% and the Russell 2000 off 1.28%.

The tech sector again led losses in equity markets.

While there was no clear catalyst for the steep drop in equities early in the session, Treasury secretary Janet Yellen rattled investors with a comment about raising rates to combat inflation – a message in stark contrast to the Federal Reserve’s repeated commitment to easy monetary policy.

Several 0% convertible bonds were again under pressure.

Snap Inc.’s recently priced 0% convertible notes due 2027 became the latest No-No, or 0% convertible bond that priced at par, to fall victim to a pullback in equities.

The notes dropped below par and contracted dollar-neutral as stock sold off alongside the broader market.

SmileDirectClub Inc.’s 0% convertible notes due 2026 hit their lowest outright level since pricing in early February with headlines about a cyberattack coinciding with the broad market sell-off.

While volume was light, SolarEdge Technologies Inc.’s 0% convertible notes due 2025 were also taking a hit on an outright basis as stock sold off post-earnings.

However, the notes were unchanged dollar-neutral, a source said.

Snap below par

Snap’s 0% convertible notes due 2027 became the latest No-No to fall victim to a pullback in equities.

The 0% convertible notes, which were trading on a 101-handle heading into Tuesday’s session, traded down to 98.25 bid, 98.75 offered shortly after the opening bell, a source said.

They continued to trend lower as the session progressed and were changing hands on a 97-handle in the late afternoon.

The notes contracted about 0.375 point dollar-neutral on the move down, a source said.

Snap’s stock traded to a high of $58.11 and a low of $53.09 before closing the day at $55.78, a decrease of 5.78%.

Stock was trading off alongside the broader market.

Snap priced a $1.15 billion issue of the 0% convertible notes last week.

The notes saw a strong start on their aftermarket debut and traded as high as 103 last Friday.

SmileDirectClub eyed

SmileDirectClub’s 0% convertible notes due 2026 returned to focus on Tuesday with the notes hitting their lowest outright level since pricing in early February.

The notes dropped more than 9 points outright with stock off about 19%.

They were changing hands at 79 in the late afternoon after previously trading on an 88-handle.

The notes contracted on the move down, a source said.

SmileDirectClub’s stock traded to a high of $9.35 and a low of $8.42 before closing the day at $8.61, a decrease of 19%.

Tuesday marked a new low for the teledentistry company’s convertible notes, which have traded below par since shortly after pricing in early February.

In addition to the general sell-off in equities, stock was taking a hit after the company announced it was the victim of a cyberattack in mid-April that could cost the company between $10 million to $15 million in revenue.

SolarEdge’s earnings

While volume was light, SolarEdge Technologies’ 0% convertible notes due 2025 were also trading down on an outright basis as stock sold off following the company’s earnings report.

The 0% convertible notes dropped more than 12 points outright with stock off more than 15%.

They were changing hands at 110 in the late afternoon.

The notes closed out the previous session at 123.

However, while down outright, the notes were unchanged on a dollar-neutral, or hedged, basis.

“They didn’t open up at all,” a source said. “That’s not good.”

SolarEdge’s stock traded to a high of $241.80 and a low of $212.18 before closing the day at $218.57, a decrease of 15.95%.

The manufacturer of solar invertors and monitoring systems for solar arrays saw its stock tank after its earnings report.

While the company missed analyst expectations on the top line, it beat on the bottom.

SolarEdge reported earnings per share of 98 cents versus analyst expectations for earnings of $1.01 per share.

However, revenue was $405.49 million versus expectations for revenue of $395.57 million.

Mentioned in this article:

SmileDirectClub Inc. Nasdaq: SDC

Snap Inc. NYSE: SNAP

SolarEdge Technologies Inc. Nasdaq: SEDGE

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