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Convertibles investors ‘shuffle paper around’ on modest stock moves; ServiceNow, PRA trade up
By Stephanie N. Rotondo
Seattle, June 2 – Convertible bonds were not moving much yet again on Friday, as there was little impetus to create volatility.
“People just like to shuffle paper around,” one New York-based sellside source said.
For instance, ServiceNow Inc.’s 0% convertible notes due 2022 – a $750 million deal that came on May 24 with an initial conversion premium of 32.5% – were trading slightly higher, but in a tight range, following along with the modest gains in the equity, a trader said.
The trader pegged the notes in a 101.75 to 102.25 context, adding that the stock was up about $1.00 on the day.
“The valuation didn’t change,” he said. “And that’s when things should trade, when valuations change.”
The stock closed up 68 cents – not even 1% – at $107.19.
PRA Group Inc.’s 3.5% convertible notes due 2023 – a $345 million deal that priced May 23 with an initial conversion premium of 35% – were trading in similar fashion, the trader said.
He saw the paper trading at 101.5 bid, 102 offered.
PRA’s shares firmed 90 cents, or 2.53%, to $36.45.
The trend of convertibles trading on slight moves in the common stock cascaded into the market.
Vipshop Holdings Ltd.’s 1.5% convertible notes due 2019 rose to highs in a 102 to 103 context, as the stock improved over 3%. But as the equity gave up some of its gains, so did the bonds, eventually ending in a 101.5 to 102 range.
The stock finished the session nearly 2% higher on the day at $13.42.
However, there was no fresh news out on the Chinese specialty online retailer – or ServiceNow or PRA Group, for that matter – to spark the movements.
Mentioned in this article:
PRA Group Inc. Nasdaq: PRAA
ServiceNow Inc. NYSE: NOW
Vipshop Holdings Ltd. NYSE: VIPS
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