Morning Commentary: LinkedIn trades in line with slightly lower shares; tech remains a focus

By Rebecca Melvin

New York, Feb. 2 – Convertibles saw some trading of LinkedIn Corp. and Yahoo! Inc. in the early going on Monday, and those names were flat, or in line, with the underlying shares on a hedged basis, as the rest of the market was mostly quiet on the first trading day of the month, sources said.

Rough winter weather may have dampened some market participation, but for a Monday, the hushed convertibles market wasn’t really out of the ordinary, they said.

The LinkedIn 0.5% convertible senior notes due 2019 were seen at 104.75 bid, 105.25 offered with the underlying shares at $222.00, a New York-based trader said.

That was down from about 106 on an outright basis from last week but in line on a hedged basis.

“The stock was a little higher [last week], and it nuked straight down,” the trader said of the LinkedIn bonds.

Trade in LinkedIn represented follow-through from last week when outright market players were looking to buy some of the quasi, investment-grade technology paper, the trader said.

That meant some of the bigger issues like LinkedIn, Yahoo!, Red Hat Inc. and SanDisk Corp. were active.

As for Monday, other than LinkedIn and Yahoo!, the convertibles market was mostly quiet, sources said.

The broader markets bounced off their lows, with crude oil and the S&P 500 stock index turning positive on relatively thin volumes, a trader said. But convertibles were “pretty quiet.”

“Certainly weather could be a factor, with the snow in Chicago and Boston, and it’s slushy here,” a New York-based sellsider said.

Looking ahead, traders think that earnings will remain a focus as the week gets going.

LinkedIn and Twitter Inc. both report later in the week.

Twitter was not heard in trade on Monday, but the Twitter A series convertibles were last seen at 90.5 and the Twitter B convertibles were seen at 90.

This name held in well on a hedged basis as shares fell last week, a trader said.

“They have richened up a lot and been one of the best performing tech converts. We’ll see, with earnings, if that will be a catalyst,” the trader said.

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