Morning Commentary: Sempra Energy preferreds weaken on second trading day

By Abigail W. Adams

Portland, Me., Jan. 8 – Sempra Energy’s 6% series A mandatory convertible preferred stock due 2021 weakened at the start of their second trading day. The preferreds were down a¼ point on a dollar-neutral basis, according to a market source.

“They’re weaker out of the gate today,” the source said.

The preferreds, which priced Jan. 4, were up about 50 basis points on their secondary market debut, a market source previously said.

Outright buyers contributed to the strong open of the preferreds, which also attracted some attention from hedge players, a source said.

The preferreds were primarily marketed to outright buyers, a syndicate source previously said. The high dividend on Sempra’s common stock made the security less appealing to hedge players, although some have been involved.

The $1.5 billion in convertible preferreds were offered concurrently with a $2.5 billion equity offering.

While hedge players are still involved in trading activity, outright buyers have largely rounded off their positions. “Now, the question is seeing where the stock goes,” a market said.

Sempra stock was down in early trading Monday to $108.02, a decrease of 0.39%.

The preferreds will be listed on the New York Stock Exchange under the symbol SREPrA. They will most likely gain strength once trading on the exchange begins, the source said.

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