Vertex convertibles in focus, rise on debut; Enphase, Silicon Labs gain post-earnings

By Abigail W. Adams

Portland, Me., Oct. 27 – The convertibles secondary space saw an uptick of activity on Wednesday with the first new paper in three weeks hitting the aftermarket and earnings-related volatility sparking activity in outstanding issues.

Vertex Energy Inc. priced $155 million of six-year convertible notes after the market close on Tuesday.

The new paper dominated activity in the secondary space despite the small size of the issue and made large gains on an outright and dollar-neutral basis.

Enphase Energy Inc.’s convertible notes were also active and posting gains on an outright basis as stock surged following a large earnings beat.

However, the notes were largely moving in line dollar-neutral.

Silicon Laboratories Inc.’s 0.625% convertible notes due 2025 were also posting gains on an outright and dollar-neutral basis following its earnings report.

Vertex in focus

Vertex Energy priced $155 million of six-year convertible notes after the market close on Tuesday at 90 with a coupon of 6.25% and an initial conversion premium of 37.5%.

Pricing came in line with price talk for a discounted offer price of 90 and at the midpoint of talk for a coupon of 6% to 6.5% and an initial conversion premium of 35% to 40%, according to a market source.

The new paper was active, despite the small size of the issue, and making large outright and dollar-neutral gains.

The 6.25% notes were changing hands at 98 early in the session. They were marked at 97.25 bid, 98.25 offered about one hour before the market close.

The notes expanded about 4 points dollar-neutral although they “leaked” a little heading into the afternoon as holders banked some of their profits, a source said.

In addition to the eye-poppingly attractive terms, the notes “carried a lot of caveats that people liked,” a source said.

Vertex’s stock traded to a high of $4.85 and a low of $4.33 before closing the day at $4.66, an increase of 8.88%.

While stock improved on Wednesday, it tanked almost 20% on the heels of the convertible notes’ announcement.

Enphase’s earnings

Enphase Energy’s convertible notes were active and making gains on an outright basis as stock surged following a large earnings beat.

Enphase’s 0% convertible notes due 2026 jumped more than 6 points outright with stock up 23%.

The notes were changing hands at 105.25 versus a stock price of $210.91 early in the session.

They climbed to 106.25 in the late afternoon.

While the notes were making large gains on an outright basis, they were moving largely in line dollar-neutral, a source said.

Enphase’s 0.25% convertible notes due 2025 were also active although the high dollar-price bonds were largely an equity surrogate, a source said.

The 0.25% convertible notes traded up to 266.5 in the early afternoon.

Enphase’s stock traded to a high of $225.40 and a low of $204.04 before closing the day at $216.22, an increase of 24.65%.

Enphase reported earnings per share of 60 cents versus analyst expectations for earnings of 49 cents.

Revenue was $352 million versus analyst expectations for revenue of $345 million.

The solar energy company also provided upbeat guidance with record revenue of $390 million to $410 million expected in the fourth quarter.

Silicon Labs earnings

Silicon Labs’ 0.625% convertible notes due 2025 were also active and making gains on an outright and dollar-neutral basis as stock surged following the semiconductor company’s earnings beat.

The 0.625% notes were up almost 20 points outright with stock up more than 20%.

The notes were changing hands at 147 versus a stock price of $174.62 early in the session.

They continued to climb alongside stock and traded as high as 158 in the late afternoon.

However, the notes saw only a nominal dollar-neutral expansion in the move.

They were pushed out about 0.25 point dollar-neutral, a source said.

Silicon Labs’ stock traded to a low of $161.21 and a high of $189.39 before closing the day at $184.06, an increase of 18.86%.

Stock surged after the company announced earnings per share of 34 cents versus analyst expectations for earnings of 15 cents.

Revenue was $184.8 million versus analyst expectations for revenue of $175.2 million.

Mentioned in this article:

Enphase Energy Inc. Nasdaq: ENPH

Silicon Laboratories Inc. Nasdaq: SLAB

Vertex Energy Inc. Nasdaq: VTNR

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