Convertibles secondary firms; Sarepta hits new high, expands dollar-neutral; MongoDB up

By Abigail W. Adams

Portland, Me., Oct. 18 – The convertibles primary market remained dormant on Tuesday despite the reignition of a “risk-on” sentiment in markets.

While expectations for new deal activity is low in the coming week as earnings season commences, the recent rally may drive some prospective issuers into the rally.

Meanwhile, the secondary space continued to firm on a choppy day for equities with indexes opening the day strong, giving back much of their gains in intraday trade only to rally into the close.

The Dow Jones industrial average closed Tuesday up 338 points, or 1.12%, the S&P 500 index closed up 1.14%, the Nasdaq Composite index closed up 0.9% and the Russell 2000 index closed up 1.16%.

Equities were “all over the place,” a source said.

However, the secondary space continued to firm with on-the-run names adding another 0.25 point to 0.375 point dollar-neutral after Monday’s 0.5 point expansion, a source said.

With Treasuries stabilizing following last week’s inflation reading, investors are turning their attention toward earnings and growth outlooks with Netflix Inc. crushing analyst expectations in earnings reported after the closing bell.

There was an uptick of trading activity on Tuesday with $90 million in reported volume about one hour into the session and $525 million on the tape about one hour before the market close.

Avalara Inc.’s 0.25% convertible notes due 2026 continued to see heavy volume with the closing of Vista Equity Partners’ acquisition expected on Wednesday.

Sarepta Therapeutics Inc.’s 1.25% convertible notes due 2027 hit their highest outright level on Tuesday since pricing and gained dollar-neutral in heavy volume.

Booking Holdings Inc.’s 0.75% convertible notes due 2025 (A3/A-) were among the most actively traded issues of Tuesday’s session with the notes rising alongside stock.

While activity in the name tempered as the session progressed, MongoDB Inc.’s 0.25% convertible notes due 2026 were on the rise in early action.

Avalara’s takeout

Avalara’s 0.25% convertible notes due 2026 remained the top traded issue in the secondary space on Tuesday as Vista Equity Partners prepares to close its acquisition of the tax compliance software company.

The 0.25% convertible notes were wrapped around 99.25 in heavy volume.

There was $17 million on the tape heading into the market close.

The 0.25% notes jumped 2.5 points to a 99-handle on Monday following news shareholders had voted to approve the takeover at a special meeting last Friday.

Vista Equity Partners announced its acquisition of the tax software company for $93.50 per share in an all-cash transaction in early September.

The transaction is expected to close on Wednesday.

The notes will be taken out at par in the transaction.

Sarepta’s new high

Sarepta’s 1.25% convertible notes due 2027 hit their highest outright level on Tuesday since pricing and expanded dollar-neutral on a strong day for the market.

The 1.25% notes traded as high as 108 early in the session but fell back to a 107-handle as the session progressed.

They were changing hands at 107.875 versus a stock price of $117.57 in the late afternoon.

The notes expanded 0.5 point dollar-neutral, a source said.

There was $12 million in reported volume.

Sarepta’s stock traded to a high of $118.75 and a low of $115.72 before closing the day at $116.83, an increase of 2.12%.

Sarepta’s 1.25% notes have performed well in the secondary space since the $1.15 billion issue priced in mid-September.

However, Tuesday marked the highest outright level for the notes since pricing.

Booking active

Booking Holdings’ 0.75% convertible notes due 2025 were major volume movers on Tuesday with the notes gaining outright alongside stock.

The 0.75% notes gained about 2 points outright with stock up more than 2% in intraday activity.

They traded up to 126 in the late afternoon.

There was $15 million in reported volume.

Booking’s stock traded to a high of $1,815.59 and a low of $1,750.48 before closing the day at $1,773.96, an increase of 1.51%.

MongoDB up early

While activity in the name tempered as the session progressed, MongoDB’s 0.25% convertible notes due 2026 were higher on an outright and dollar-neutral basis in early trading.

The notes climbed 6 points outright with stock up $10 the first hour after the opening bell.

The notes were seen at 116 versus a stock price of $192.26 early in the session.

However, they gave back much of their early gains and closed the day on a 114-handle, a source said.

There was $8 million in reported volume.

MongoDB’s stock traded to a high of $196.78 and a low of $185.57 before closing the day at $189.97, an increase of 4.18%.

Mentioned in this article:

Avalara Inc. NYSE: AVLR

Booking Holdings Inc. Nasdaq: BKNG

MongoDB Inc. Nasdaq: MDB

Sarepta Therapeutics Inc. Nasdaq: SRPT

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