onsemi convertibles fall below par; Coupa active; Pure Storage arb players make out

By Abigail W. Adams

Portland, Me., March 2 – While the convertibles primary market closed after an active week with $815 million pricing over three deals, the convertibles secondary space remained relatively active with new and recent deals and topical news sparking trading activity.

Equity indexes remained volatile on Thursday as selling in Treasuries pushed the 10-year Treasury yield solidly above 4%.

Equity indexes were mixed to start the day but saw a strong close after dovish comments from a Federal Reserve official helped to lift market sentiment.

The Dow Jones industrial average closed Thursday up 342 points, or 1.05%, the S&P 500 index closed up 0.76%, the Nasdaq Composite index closed up 0.73% and the Russell 2000 index closed up 0.22%.

There was $88 million in reported volume about one hour into the session and $575 million in reported volume about one hour before the close.

onsemi’s 0.5% convertible notes due 2029 again fell below par on a heavy day for its stock although the notes fought off losses into the close.

Coupa Software Inc.’s convertible notes were active as the notes prepare to be taken out following the completion of Thoma Bravo’s acquisition of the company.

Pure Storage Inc.’s soon-to-mature 0.125% convertible notes due April 15, 2023 were also active as stock imploded post-earnings.

The notes, which are in their averaging period, sank outright but expanded several points dollar-neutral on the move down.

onsemi below par

onsemi’s 0.5% convertible notes due 2029 sank below par in active trade on a heavy day for stock, although the notes fought off losses into the close.

The 0.5% notes were off about 3.5 points outright with stock down almost 6% early in the session.

The convertibles were changing hands at 97.625 versus a stock price of $72.43 early in the session.

However, they were fighting their way back to par into the market close.

The notes were trading at 99.5 versus a stock price of $75.89 in the late afternoon.

The notes were largely unchanged dollar-neutral, a source said.

There was $18 million in reported volume.

onsemi’s stock traded to a low of $72 and a high of $77.32 before closing at $76.75, a decrease of 1.89%.

The 0.5% convertible notes were wrapped around 101 heading into Thursday’s session, their highest outright level since the issue priced at par.

The $200 million greenshoe was recently exercised in full, lifting the deal size to $1.5 billion.

Coupa complete

Coupa’s convertible notes were active with the notes soon to be taken out at par following the completion of Thoma Bravo’s acquisition of the company.

The 0.125% convertible notes due 2025 and 0.375% convertible notes due 2026 were both changing hands at 99.625 during Thursday’s session.

The notes were among the top volume movers of the day with the 0.375% notes seeing $21 million in reported volume and the 0.125% notes seeing $15 million in reported volume about one hour before the market close.

The notes were a short-term yield play with payment on the bonds expected by the end of the month, a source said.

Coupa and Thoma Bravo announced the completion of the $8 billion acquisition on Tuesday.

Pure Storage arb play

Pure Storage’s soon-to-mature 0.125% convertible notes due April 15, 2023 saw heavy volume as stock imploded post-earnings.

The notes, which are in their averaging period, sank outright but expanded several points dollar-neutral on the move down, a source said.

The 0.125% notes were trading around parity heading into Thursday’s session.

They fell 10 points with stock off 15% post-earnings.

The notes were seen at 100.5 versus a stock price of $24.51 in the late afternoon.

They opened up on the move down.

“This was a good, classic, high-gamma, short-maturity situation,” a source said. “It worked out for arbs.”

Pure Storage’s stock traded to a low of $23.74 and a high of $25.85 before closing at $24.43, down 15.20%.

While Pure Storage reported mixed earnings with a large beat on the bottom line and a slight miss on the top, stock tanked on weak guidance.

The technology company reported earnings per share of 53 cents versus analyst expectations for earnings of 39 cents.

Revenue was $810 million versus the $811 million expected.

However, the company projected revenue growth in the mid-to-high single digits with analysts expecting revenue growth of 13%.

Mentioned in this article:

Pure Storage Inc. NYSE: PSTG

onsemi Nasdaq: ON

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