Fisker distressed convertibles gain; Enphase down outright; Splunk active

By Abigail W. Adams

Portland, Me., April 26 – The convertible bond primary market remained dormant on Wednesday with prospects diminishing for new issuance before the week comes to a close.

The slowdown in dealmaking has been felt across asset classes with no opportunistic issuers tapping the market amid continued uncertainty, a source said.

“Everyone is waiting to see what the Fed does and if there will be a recession,” the source said.

In the current market climate, companies have been more concerned with exchanges or buybacks to clean up their balance sheet than new issuance, a source said.

Meanwhile, it was another quiet day in the convertibles secondary space on Wednesday with equity markets mixed as investors digested the latest slate of earnings.

While equity indexes launched the day strong with better-than-expected tech earnings boosting market sentiment, indexes quickly gave back their gains with the tech-heavy Nasdaq the only one to remain in positive territory.

The Dow Jones industrial average closed Wednesday down 229 points, or 0.68%, the S&P 500 index closed down 0.38%, the Nasdaq Composite index closed up 0.47% and the Russell 2000 index closed down 1.14%.

Trading activity remained muted with $413 million in reported volume about one hour before the market close and investment-grade issues continuing to dominate the tape.

However, topical and earnings-related news sparked activity in some off-the-run issues.

Fisker Inc.’s distressed 2.5% convertible notes due 2026 were bid up in active trade as stock soared following news European regulators had approved the sale of one of its vehicles.

Enphase Energy Inc.’s convertible notes made large outright moves as stock tanked following earnings.

However, the notes were largely unchanged on a dollar-neutral basis.

Splunk Inc.’s convertible notes received renewed attention with the notes rising alongside stock following positive earnings from sector peers.

Fisker lifted

Fisker’s distressed 2.5% convertible notes due 2026 made large outright gains on Wednesday as stock soared following regulatory approval for sales in Europe.

The 2.5% notes climbed 6.5 points outright with stock up almost 20% early in the session.

The notes were changing hands at 43.5 with the yield about 30.375% early in the session, sources said.

They traded as high as 46 in the late afternoon with the yield narrowing to 28.375%.

There was $8 million in reported volume.

Fisker’s stock traded to a low of $5.28 and a high of $6.26 before closing the day at $5.98, an increase of 22.04%.

Stock soared after the company announced it would begin deliveries of its Ocean SUV following European regulatory approval.

Enphase’s warning

Enphase’s convertible notes sank outright but were largely unchanged dollar-neutral as stock tanked following earnings.

Enphase’s 0% convertible notes due 2026 sank 8 points outright with stock off more than 23%.

The 0% notes were marked at 97 bid, 97.75 offered versus a stock price of $170 early in the session, a source said.

They were changing hands at 95.875 versus a stock price of $164.55 in the late afternoon.

There was $10 million in reported volume.

Enphase’s 0% convertible notes due 2028 dropped 13.5 points outright.

They were changing hands at 95 versus a stock price of $166.24 in the late afternoon.

There was $7 million in reported volume.

The notes were moving inline on swap.

“They’ve held up wonderfully,” the source said.

Enphase’s stock traded to a high of $183.31 and a low of $160.61 before closing the day at $163.83, a decrease of 25.73%

While Enphase beat on both the top and bottom line, its warning about sales growth dragged down the broader solar industry.

Enphase reported earnings per share of $1.37 versus analyst expectations for earnings of $1.22 and revenue of $726 million versus analyst expectations for $723 million.

However, the company also warned that sales growth would slow in the coming year with high interest rates and regulation changes in California making the switch to solar less cost-effective, Badri Kothandaraman noted in a CEO letter to shareholders.

Splunk active

Splunk’s convertible notes were on the rise in active trade on Wednesday following positive earnings from industry peers.

The software company’s 1.125% convertible notes due 2025 gained about 0.5 point outright with stock up 2%.

The notes were changing hands at 94.875 versus a stock price of $87.15 in the late afternoon.

There was $10 million in reported volume.

Splunk’s 1.125% convertible notes due 2027 jumped 1 point outright.

The notes were changing hands at 85.75 versus a stock price of $87.07 in the late afternoon.

There was $6 million in reported volume.

Splunk stock traded to a low of $85.96 and a high of $87.46 before closing the day at $86.40, an increase of 1.98%.

Mentioned in this article:

Enphase Energy Inc. Nasdaq: ENPH

Fisker Inc. NYSE: FSR

Splunk Inc. Nasdaq: SPLK

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