Exact Sciences convertibles in focus; K12 notes improve; Chegg trades down outright

By Abigail W. Adams

Portland, Me., Oct. 27 – The convertibles primary market was again quiet on Tuesday with the calendar expected to be light throughout the week.

With no new paper entering the secondary space, trading activity was again muted with $55 million in reported volume about one hour into the session and $407 million on the tape heading into the market close.

While trading volume was light, there were some huge movements in the space as convertibles issuers released their earnings reports.

K12 Inc.’s 1.125% convertible notes due 2027 gained on an outright and dollar-neutral basis following a better-than-expected earnings report.

Chegg Inc.’s convertible notes were again active and trading down as stock sold off following its earnings report.

Exact Sciences Corp.’s convertible notes were in focus with the notes gaining on an outright and dollar-neutral basis following its earnings report, an acquisition announcement and a secondary offering.

K12 expands

K12’s 1.125% convertible notes due 2027 were on the rise as stock improved following a better-than-expected earnings report.

The 1.125% notes gained more than 3 points to trade up to 91.75 early in the session.

However, they gave back some of their early gains as stock came in as the session progressed.

The notes were changing hands at 91 versus a stock price of $29.59 in the late afternoon.

They were improved about 1.375 points dollar-neutral, a source said.

The bonds saw more than $8.5 million in reported volume.

K12’s stock traded as high as $33.85 before closing the day at the session low of $28.93, an increase of 2.44%.

The education technology company announced earnings per share of 30 cents versus analyst expectations for a loss per share of 31 cents.

Revenue was $370 million versus analyst expectations for revenue of $362 million, MarketWatch reported.

K12’s 1.125% convertible notes have struggled since pricing in late August with the notes bottoming out in the low 80s in early October.

Chegg drops outright

Chegg’s convertible notes were active and trading down alongside stock on the heels of its third-quarter earnings report.

The 0% convertible notes due 2026 dropped 5 points outright with stock off more than 10%.

The notes were changing hands at 104.125 versus a stock price of $77.57 in the late afternoon.

Chegg’s deep in the money 0.125% convertible notes due 2025 fell more than 13 points outright.

They were changing hands at 162.75 in the late afternoon.

Both tranches remained among the most actively traded issues in the secondary space with the 0% convertible notes seeing more than $13 million in reported volume and the 0.125% convertible notes seeing more than $11 million.

Chegg’s stock traded to a high of $82.24 and a low of $75.82 before closing the day at $77.11, a decrease of 11.06%.

Stock dropped on Tuesday despite the company reporting better-than-expected earnings and an upbeat forecast.

Chegg reported earnings per share of 17 cents versus analyst expectations for earnings of 10 cents.

Revenue was $154 million versus analyst expectations for revenue of $143.9 million.

Exact Sciences up

Exact Sciences’ convertible notes were in focus and jumped on an outright and dollar-neutral basis after the company announced earnings, two acquisitions and a secondary offering.

The 0.375% convertible notes due 2027 were up more than 14 points outright with stock up more than 20%.

The notes were changing hands at 132.5 early in the session and climbed to 135 by the late afternoon, sources said.

Exact Sciences’ 0.375% convertible notes due 2028 also jumped about 14 points outright.

The notes were trading at 123.5 early in the session and rose to 127.75 in the late afternoon.

The notes were expanding on the move up, a source said.

One source both tranches up more than 1 point dollar-neutral.

Exact Sciences’ stock broke out to a new 52-week high in intra-day activity.

Stock traded as high as $141.9 and as low as $113.27 before closing the day at $131.12, an increase of 23.04%.

Stock soared after the molecular diagnostic company announced a slew of news.

While the company missed analyst expectations on the bottom line, it beat on the top.

Exact Sciences reported losses per share of $1.46 versus analyst expectations for losses per share of $0.52.

However, revenue was $408 million versus analyst expectations for revenue of $337 million.

Stock rocketed higher on news of the company’s acquisitions.

Exact Sciences announced that it was acquiring cancer detection company Thrive Early Detection for $2.15 billion in cash and stock.

The company also announced it had acquired Base Genomics Ltd. for $410 million in cash.

Exact Sciences also announced that it was pricing a secondary offering of 8.6 million shares for gross proceeds of $869.2 million, according to a 424B2 filing with the Securities and Exchange Commission.

Mentioned in this article:

Chegg Inc. NYSE: CHGG

Exact Sciences Corp. Nasdaq: EXAS

K12 Inc. NYSE: LRN

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