Proficient convertibles rise on sale chatter; MicroStrategy notes fall post-earnings

By Abigail W. Adams

Portland, Me., April 30 – The convertibles primary market remained dormant on Tuesday with markets weak on the eve of the Federal Open Market Committee’s Wednesday announcement.

The slate of macro data released since the previous Fed announcement has called into question the rate cuts the Fed previously signaled were to be expected in 2024.

With the confirmation the Fed has said would be needed to commence cutting rates not provided by recent data, markets are expecting a much more hawkish tone on Wednesday and bracing for a higher-for-longer rate environment, sources have said.

The Dow Jones industrial average closed Tuesday down 570 points, or 1.49%, the S&P 500 index closed down 1.57%, the Nasdaq Composite index closed down 2.04% and the Russell 2000 index closed down 2.09%.

There was some pain in the market although activity remained light with $35 million in reported volume early in the session and $373 million on the tape in the late afternoon.

While trading volumes remained thin with an absence of new paper in the market, topical and earnings-related news continued to spark large price movements.

Perficient Inc.’s 0.125% convertible notes due 2026 were the major gainer of Tuesday’s session with the notes jumping on reports the company was considering putting itself up for sale.

MicroStrategy Inc.’s convertible notes sank alongside stock after a large earnings miss.

Perficient for sale?

Perficient’s 0.125% convertible notes due 2026 were the major gainers of Tuesday’s session with the notes jumping on reports the company was considering putting itself up for sale.

The 0.125% convertible notes moved from an 85-handle to an 88-handle and were wrapped around 88 in the late afternoon.

They gained 3 points dollar-neutral on the move up, a source said.

Perficient’s stock traded to a low of $42.62 and a high of $47.99 before closing at $47.26, up 8.74%.

The off-the-run issue saw strong buying interest after reports circulated the market the company was considering a sale and was working with advisers to gauge interest.

MicroStrategy falls

MicroStrategy’s convertible notes sank alongside stock on Tuesday after a large earnings miss.

The 0% convertible notes due 2027 were the most active tranche with the notes falling 10 points outright.

They were trading at 103.5 versus a stock price of $1,083 in the late afternoon, according to a market source.

There was $11 million in reported volume.

The 0.625% convertible notes due 2030 were down 11 points with the notes falling below par for the first time since pricing in early March.

The notes were trading at 103.325 versus a stock price of $1,199 early in the session, a source said.

They sank to 97.875 in the late afternoon.

There was $5 million in reported volume.

MicroStrategy’s 0.875% convertible notes due 2031 were off 8 points outright.

They were trading at 79.875 in the late afternoon.

While the 0.875% convertible notes initially performed well in the aftermarket after also pricing in early March, they have traded below par for most of April.

MicroStrategy’s stock traded to a high of $1,215 and a low of $1,063 before closing at $1,065.03, a decrease of 17.63%.

Stock dived after the Bitcoin bull posted a large earnings miss.

MicroStrategy posted losses per share of $8.26 versus the losses per share of 12 cents expected.

Revenue was $115.25 million versus the $121.38 million expected.

However, the large loss was largely due to the accounting of digital assets.

Mentioned in this article:

MicroStrategy Inc. Nasdaq: MSTR

Perficient Inc. Nasdaq: PRFT

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