By Abigail W. Adams
Portland, Me., Jan. 8 – The U.S. convertibles primary market was quiet on Monday as the secondary market saw trading activity taper off in the first new issue of the year.
Sempra Energy’s recently priced 6% series A mandatory convertible preferred stock due 2021 weakened at the start of their second trading day. The preferreds were down a ¼ point on a dollar-neutral basis, according to a market source.
“They’re weaker out of the gate today,” the source said.
While Sempra weakened, several existing issuances made gains alongside their underlying equity.
Nevro Corp’s 1.75% convertible notes due 2021 jumped 7 points in scattered trading activity as the medical device company’s equity soared after receiving FDA approval for its spinal cord stimulation system.
Vipshop Holdings Ltd.’s 1.5% convertible notes due 2019 and Square Inc.’s 0.375% convertible notes due 2022 also saw some action during Monday’s session and made gains as the equity of both companies experienced high-volume trading.
Sempra weakens
Sempra’s 6% series A mandatory convertible preferreds due 2021 weakened at the start of their second full trading day. The preferreds, which priced on Jan. 4, were up about 50 basis points in their secondary market debut, a market source previously said.
The notes contracted a ¼ point on a dollar-neutral basis shortly after market open Monday. 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 since the preferreds hit the secondary market.
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 source said.
Sempra stock was up at the market close on Monday to $108.48, an increase of 0.03%.
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.
Nevro jumps
Nevro’s 1.75% convertible notes due 2021 made large gains in scattered trading during Monday’s session. The notes were trading in the 111 to 112 range after trading in the 102 to 105 range for most of December, according to Trace data.
Nevro’s equity skyrocketed during Monday’s session, closing the day at $81.33, an increase of 14.40%. The Redwood City, Calif-based global medical device company announced Monday it received FDA approval for its Senza II Spinal Cord Stimulation System.
The spinal cord stimulation system is a non-pharmaceutical treatment for chronic pain that focuses on the delivery of electrical pulses near the spinal cord.
Vipshop above par
Vipshop Holdings’ 1.5% convertible notes due 2019 gained about 2 points during active trading, ending Monday’s session at a high of 102.358, according to Trace data.
Vipshop’s equity was up to $13.58, an increase of 9.78%, at market close Monday.
The notes spent most of 2017 below par and were struggling to stay at par as recently as Friday.
However, the Guangzhou, China-based e-commerce company’s American Depository Shares and convertible notes received a boost Monday after Tencent Holdings and JD.com made good on their previously announced investment into Vipshop.
Tencent, an internet holdings conglomerate which recently achieved the rank of Asia’s first $500 billion company, now owns a 7% stake in Vipshop, and JD.com a 5.5% stake, according to a Securities and Exchange Commission filing.
The investment, which was announced in mid-December, is a strategic effort to take on e-commerce rival Alibaba.
Square gains
Square’s 0.375% convertible notes due 2022, named as one of the best performers of 2017, continued to make gains during active trading Monday.
The notes rose to a high of 187.855 before ending the day at 186.444, according to Trace data.
The notes were up about 6 points from the closing trade on Friday.
After steady gains last week, Square stock ended Monday’s session at $40.76, a decrease of 0.92%. While the San Francisco, Calif-based financial services and mobile payment company’s stock was down Monday, it has surpassed analysts’ average target price of $38.71.
Square stock was at $17 when the company issued $480 million in the 0.375% convertible notes in February 2017.
Mentioned in this article:
| Sempra Energy: | NYSE: SRE
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| Nevro Corp.: | NYSE: NVRO
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| Vipshop Holdings Ltd.: | NYSE: VIPS
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| Square Inc.: | NYSE: SQ
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