Workday convertible notes active; Cinemark, Etsy notes improve; Guess? skyrockets

By Abigail W. Adams

Portland, Me., Sept. 2 – The convertibles secondary space remained firm on Wednesday as equities extended their rally despite a pullback in some of the recent high-flying tech stocks, including Tesla Inc.

Retail, fashion and leisure names were driving the rally in equities on Wednesday.

Guess? Inc.’s 2% convertible notes due 2024 skyrocketed alongside stock following the fashion retailer’s second-quarter earnings report and resumption of a dividend.

Cinemark Holdings Inc.’s 4.5% convertible notes due 2025 gained on an outright basis as stock skyrocketed on Wednesday amid the reopening of its theaters across the country.

Workday Inc.’s 0.25% convertible notes due 2022 once again saw high-volume activity as stock came in from its recent heights during Wednesday’s session.

Etsy Inc.’s 0.125% convertible notes due 2027 were also major volume movers on Wednesday with the notes continuing their upward momentum.

Guess? gains

Guess? long-struggling 2% convertible notes due 2024 were lifted on Wednesday as stock skyrocketed following a surprise earnings beat.

The 2% notes were up almost 9 points outright with stock up more than 12%.

They traded up to 84.75 in the late afternoon after previously changing hands on a 76-handle, a source said.

Guess? stock traded to a high of $14.74 and a low of $13.10 before closing the day at $13.40, an increase of 11.43%.

The fashion designer and retailer smashed expectations with its second-quarter earnings report.

The company reported a loss per share of 1 cent versus analyst expectations for a loss per share of 57 cents.

Revenue was $398.54 million versus analyst expectations for revenue of $384.82 million.

The company also announced that it was resuming its quarterly cash dividend of $0.1125. The dividend was suspended for the first quarter.

The 2% notes have dividend protection. However, the conversion ratio adjustment will only kick in if dividends are more than $0.1125 per quarter, the dividend on stock when the notes priced in April 2019, a source said.

Guess? convertible notes have long been busted and are one of the few issues in the convertibles space to still trade well below par.

With the rally in the secondary space, accounts with a mandate for “yieldy” convertible notes have been having a hard time finding paper, a source previously said.

Cinemark gains

Cinemark’s 4.5% convertible notes due 2025 made large gains on an outright basis as stock shot up on Wednesday amid the reopening of theaters across the country.

While volume was light, the 4.5% notes rose more than 10 points outright with stock up more than 9%.

The 4.5% notes traded up to 138 in the late afternoon.

Cinemark stock traded to a low of $15.23 and a high of $16.56 before closing the day at $16.08, an increase of 8.94%.

A little over two weeks after pricing, Cinemark’s convertible notes are already in-the-money with the conversion price on the notes $14.35.

Workday active

Workday’s 0.25% convertible notes due 2022 were active on Wednesday as stock came in after recently breaking out to new heights.

The 0.25% convertible notes were down about 4 points outright with stock off more than 3%.

The notes were changing hands at 166.75 early Wednesday and were seen changing hands just south of 165 in the late afternoon, sources said.

Workday stock traded to a high of $243.38 and a low of $232.12 before closing the day at $233.48, a decrease of 3.42%.

The stock and convertible notes of the human resources and financial management software company both hit new heights last Friday after a large earnings beat.

Workday’s convertible notes traded up to 172, their highest outright level since pricing in 2018, as stock broke out to a new 52-week high.

Etsy expands

The upward momentum of Etsy’s 0.125% convertible notes due 2027 continued on Wednesday with the notes again expanding in high-volume activity.

The 0.125% notes rose about 1 point outright with stock off during Wednesday’s session.

They traded as high as 104.375 in intraday activity and were seen changing hands at 103.875 in the late afternoon.

The notes expanded another 0.75 point dollar-neutral, a source said.

Etsy stock traded to a high of $129.94 and a low of $120.25 before closing the day at $124.37, a decrease of 0.54%.

Etsy’s latest convertible notes have made large gains since pricing on Aug. 19.

Mentioned in this article:

Cinemark Holdings Inc. NYSE: CNK

Etsy Inc. Nasdaq: ETSY

Guess? Inc. NYSE: GES

Workday Inc. Nasdaq: WDAY

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