Clovis convertibles clobbered; Exact Sciences, FireEye improve; Weatherford rebounds

By Abigail W. Adams

Portland, Me., Oct. 31 – The convertible secondary space was again active on Wednesday with more than $161 million on the tape early in the session and $596 million on the tape shortly before the market close.

However, trading volume was largely driven by end-of-the month activity with Booking Holdings Inc.’s 0.35% convertible notes due 2020 a prime example, a market source said.

The 0.35% convertible notes topped the volume charts with more than $27 million on the tape a little over one hour into Wednesday’s session. The activity was attributed to portfolio adjustments.

Weatherford International Ltd.’s 5.875% convertible notes due 2021 remained active in secondary trading with the notes improving on an outright and dollar-neutral basis as the company’s stock rebounded.

Clovis Oncology Inc.’s convertible notes got “clobbered” on Wednesday after the company reported third-quarter earnings with the notes contracting 3.5 to 5 points dollar-neutral, a market source said.

However, Exact Sciences Corp.’s 1% convertible notes due 2025 and FireEye Inc.’s 0.875% convertible notes due 2024 were improved on an outright and dollar-neutral basis after a third-quarter earnings beat.

End of the month

Booking Holdings’ 0.35% convertible notes due 2020 were volume leaders in the secondary space with $27 million on the tape about one hour into Wednesday’s session.

While the notes were active early, trading tempered into the afternoon.

The notes were up about 4 points outright. They were seen trading at 145.25 versus an equity price of $1,877.25.

Booking Holdings stock closed the day at $1,874.58, an increase of 2.1%.

The notes were trading just under parity, a market source said.

Sources attributed the activity to end of the month portfolio adjustments.

Weatherford rebounds

Weatherford International’s 5.875% convertible notes due 2021 saw a slight rebound after getting beaten over the past two days.

The notes were up about 1 point outright in intraday trading to 77.5 as stock rebounded. However, the notes gave up some of their gains as stock came in toward the market close.

They were seen changing hands at 76.75 versus an equity price of $1.38 in the late afternoon.

After dropping as much as 10 points on a dollar-neutral basis on Monday and Tuesday, the notes improved by a couple of points dollar-neutral on Wednesday, a market source said.

Weatherford stock traded as high as $1.45 before coming in to close Wednesday at $1.35, an increase of 7.14%.

With more than $22 million bonds on the tape, the notes remained one of the most actively traded issues in the secondary space.

Weatherford’s convertible notes, alongside its junk bonds and equity, have been under pressure since the oilfield services company reported earnings prior to the market open on Monday.

Clovis clobbered

Clovis Oncology’s convertible notes were getting “clobbered like a baby seal” on Wednesday after the company released disappointing third-quarter earnings, a market source said.

The 1.25% convertible notes due 2025 traded as low as 59 during Wednesday’s session.

They were seen changing hands at 61.875 versus an equity price of $11.76 in the mid-afternoon.

The notes were contracted 5 points dollar-neutral, a market source said. About $15 million of the bonds were on the tape by the late afternoon.

The 1.25% convertible notes have struggled in the secondary space since shortly after pricing at par in mid-April.

However, Wednesday marked the lowest outright price for the notes since the $300 million issue hit the market.

Clovis’ 2.5% convertible notes due 2021 were also taking a beating on Wednesday. The notes dropped about 3.5 points dollar-neutral, a market source said.

They were changing hands at 76 versus an equity price of $11.85 with about $9.5 million on the tape.

Clovis stock closed Wednesday at $11.63, a decrease of 29.98%.

Clovis tanked after the company announced a third-quarter earnings miss and lower-than-expected sales growth in its flagship product Rubraca.

Clovis reported a loss of $1.71 per share in the third-quarter versus analyst expectations of a loss per share of $1.59.

Investors had high hopes for Rubraca when it was initially approved by the Food and Drug Administration. However, there were only $22.8 million in sales in the third-quarter.

There is concern Clovis’ technology is no longer as cutting edge as it used to be, a market source said.

Clovis stock dropped almost 20% last week after AstraZeneca and Merck released positive clinical data for a competing treatment to Rubacra.

Clovis’ earnings will also weigh on competitor and fellow convertibles issuer Tesaro Inc., which is slated to report earnings after the market close on Thursday, a market source said.

Earnings beat

While the market hammered Clovis, Exact Sciences’ 1% convertible notes due 2025 and FireEye’s 0.875% convertible notes due 2024 improved on both an outright and dollar-neutral basis on Wednesday after both reported earnings beats.

Exact Sciences’ 1% convertible notes jumped more than 7 points outright and expanded about 1 point dollar-neutral, a market source said.

They were seen changing hands at 117.625 versus an equity price of $71.95 in the mid-afternoon with more than $12.5 million bonds on the tape.

Exact Sciences stock closed Wednesday at $71.05, an increase of 10.33%.

Exact Sciences reported a loss per share of 37 cents in the third quarter, which beat analyst expectations of a loss per share of 42 cents.

Exact Sciences also beat on the top line with revenue of $118.3 million versus analyst expectations of revenue of $109.2 million.

Users of Exact Sciences’ flagship colon-cancer screening product Cologuard continued to increase in the third-quarter, a market source said.

FireEye’s 0.875% convertible notes due 2024 were up almost 4 points outright and expanded 1 point dollar-neutral during Wednesday’s session.

The notes were seen changing hands at 105.5 versus an equity price of $18.68 in the late afternoon with more than $12 million of the bonds on the tape.

FireEye stock closed Wednesday at $18.49, an increase of 9.73%.

FireEye reported earnings per share of 6 cents on revenue of $211.7 million versus analyst expectations of earnings per share of 2 cents on revenue of $208.4 million.

Mentioned in this article:

Booking Holdings Inc. Nasdaq: BKNG

Clovis Oncology Inc. Nasdaq: CLVS

Exact Sciences Corp. Nasdaq: EXAS

FireEye Inc. Nasdaq: FEYE

Tesaro Inc. Nasdaq: TSRO

Weatherford International Ltd. NYSE: WFT

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