Cutera convertibles rise; InterDigital up outright, weaker on swap; Twitter improves

By Abigail W. Adams

Portland, Me., May 26 – The convertibles secondary space was active on Thursday as equity markets extended their gains.

The Dow Jones industrial average closed up 517 points, or 1.61%, the S&P 500 index closed up 1.99%, the Nasdaq Composite index closed up 2.68% and the Russell 2000 index closed up 2.17%.

“It’s a lift-a-thon,” a source said.

Buyers continued to return to risk assets following the release of the Federal Reserve’s May meeting minute notes as the market dialed back its projection for rate increases in the second half of 2022.

There was $63 million in reported convertibles trading volume about one hour into the session and $625 million on the tape heading into the market close.

Buyers were outnumbering sellers nearly 3 to 1, a source said.

Cutera Inc.’s 2.25% convertible notes due 2028 continued to dominate activity with the notes climbing higher on an outright basis.

InterDigital, Inc.’s 3.5% convertible notes due 2027 also continued to gain outright although the notes were weaker on swap.

Twitter Inc.’s 0% convertible notes due 2026 were again on the rise after Elon Musk released a new funding proposal for the takeover.

Nova Measuring Instruments Ltd.’s deep-in-the-money 0% convertible notes due 2025, a small, illiquid issue that rarely trades in volume, also made an appearance on the tape with a large outright seller in the market.

Cutera gains

Cutera’s 2.25% convertible notes due 2028 continued to dominate the tape with the notes again seeing a volatile start to the day but roaring alongside stock as the session progressed.

Cutera’s 2.25% notes were down about 0.5 point outright with stock off 0.4% early in the session.

The notes were trading just shy of 103 versus a stock price of $43.05 early in the session.

However, they jumped to a 105-handle as stock turned positive as the session progressed.

The notes were changing hands at 105.44 versus a stock price of $45.33 in the late afternoon.

The notes have gained about 0.75 point dollar-neutral since pricing, a source said.

There was $16 million in reported volume.

Cutera’s stock traded to a high of $45.60 and a low of $42.63 before closing the day at $44.83, an increase of 2.84%.

InterDigital up outright

InterDigital’s 3.5% convertible notes due 2027 also saw a rocky start to the day but climbed as the session progressed.

The notes were down about 0.625 point outright to change hands at 101 early in the session.

However, they climbed 2.625 points outright with stock up almost 5% as the session progressed.

The 3.5% notes were changing hands at 104.375 versus a stock price of $63.10 in the late afternoon.

While the notes were up outright, they were weaker on swap, a source said.

There was $9 million in reported volume.

InterDigital’s stock traded to a high of $63.38 and a low of $60.36 before closing at $63.19, an increase of 4.9%.

Twitter gains

Twitter’s 0% convertible notes due 2026 were again on the rise in heavy volume as Musk proposed a new financing plan for the takeover of the company.

The notes rose more than 2 points outright to trade just shy of 90 in the late afternoon.

“It’s up with Musk’s antics,” a source said.

There was $16 million in reported volume.

While the high premium notes are not equity sensitive, Twitter’s stock closed Thursday’s session at $39.54, an increase of 6.4%.

Musk announced a new plan to finance his $44 billion takeover of the company, which involves dropping a margin loan tied to his stake in Tesla and increasing the equity component to $33.5 billion.

While Musk announced a little more than a week ago that the deal was on hold pending information on spam bots, there were questions surrounding the financing of the deal.

Doubt still remains about whether the takeover will come to fruition.

However, Twitter’s 0% convertible notes would provide a healthy return if it does with the takeover triggering a par put.

Nova on the tape

Nova’s deep-in-the-money 0% convertible notes due 2025 made an appearance on the tape after almost 2 months with no round lot trades.

The notes were changing hands at 144.75 versus a stock price of $100.80 early in the session, according to a market source.

There was $9 million in reported volume.

The issue has been largely tucked away with the last round lot trade in the notes on March 31 when they traded at 156.875.

However, the notes were active on Thursday with one outright seller in the market and about seven buyers, a source said.

The Israel-based semiconductor parts supplier’s American Depositary Shares opened the day with losses but climbed alongside broader markets.

The ADSs traded to a low of $99.14 and a high of $107.54 before closing the day at $106.80, an increase of 5.83%.

While Thursday was a strong day for the market, several companies in the semiconductor sector saw a weak open with Nividia Corp.’s weak forward guidance casting a cloud over the industry.

Companies are starting to address their convertible notes with short-term maturities with the two deals to price over the course of the week coming as refinancings.

Mentioned in this article:

Cutera Inc. Nasdaq: CUTR

InterDigital, Inc. Nasdaq: IDCC

Nova Measuring Instruments Ltd. Nasdaq: NVMI

Twitter Inc. NYSE: TWTR

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