High-grade convertible names dominate; Uber notes better; Halozyme rises; earnings eyed

By Abigail W. Adams

Portland, Me., July 25 – There was an uptick of activity in the convertibles secondary space on Tuesday as market players eyed the earnings and Fed rate hike decision that will soon be moving markets.

Equity indexes wavered between gains and losses at the open with the strong upward momentum of previous weeks waning.

However, they remained optimistic ahead of earnings from the bellwethers of tech that will put the AI-fueled rally in equities to a test.

The Dow Jones industrial average closed Tuesday up 27 points, or 0.08%, the S&P 500 index closed up 0.28%, the Nasdaq Composite index closed up 0.61% and the Russell 2000 index closed up 0.10%.

There was $45 million of convertibles trading on the tape about one hour into the session and $400 million about one hour before the market close.

High-grade names continued to dominate with Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) and American Water Capital Corp.’s 3.625% exchangeable notes due 2026 (Baa1/A-) again collectively accounting for about one-quarter of trading activity in the space.

However, topical news and pre-positioning for earnings sparked activity in a number of names.

Uber Technologies Inc.’s 0% convertible notes due 2025 saw a resurgence of interest with the notes improved after an analyst flagged it as a candidate for inclusion in the S&P 500 index.

While activity in the name tempered as the session progressed, Granite Construction Inc.’s 3.75% convertible notes due 2028 were active early with the company staring down earnings later in the week.

Halozyme Therapeutics Inc.’s 1% convertible notes due 2028 also saw a round of activity after the company announced its earnings date.

Volume movers

There was an uptick of activity in the secondary space on Tuesday although it remained concentrated in investment-grade issues.

American Water’s 3.625% exchangeable notes due 2026 were the most actively traded issue during Tuesday’s session although with little movement in price.

The 3.625% notes were changing hands just north of 102 versus a stock price of $147.83 in the late afternoon, according to a market source.

There was $35 million in reported volume.

American Water’s stock traded to a low of $146.82 and a high of $148.53 before closing at $148.28, an increase of 0.41%.

Southern Co.’s 3.875% convertible notes were also little changed in heavy volume.

The 3.875% notes were seen at 100.875 versus a stock price of $73 in the late afternoon.

There was $22.5 million in reported volume.

Southern Co.’s stock traded to a low of $72.40 and a high of $73.18 before closing at $72.61, down 0.48%.

Uber interest

Uber’s 0% convertible notes due 2025 saw a resurgence of interest on Tuesday after an analyst flagged it as a possible candidate for inclusion in the S&P 500.

The 0% notes improved in active trade.

They traded up about 0.5 point outright with stock either side of unchanged throughout the session.

The notes were changing hands at 95 versus a stock price of $47.28 in the late afternoon, according to a market source.

There was $8 million in reported volume.

Uber’s stock traded to a high of $47.73 and a low of $46.93 before closing at $47.17, off 0.32%.

The convertible notes saw renewed interest after a Bernstein analyst claimed the company’s stock was on track for inclusion in the S&P 500 index by the second half of 2024.

Positive GAAP earnings on a trailing 12-month basis is one of the final barriers of consideration for entry into the index, which Uber is on track to accomplish by 2024, according to the analyst.

Earnings eyed

Several names saw some action on Tuesday as market players eyed upcoming earnings.

While activity tempered as the session progressed, Granite Construction’s 3.75% convertible notes due 2028 were active early with the company staring down earnings later in the week.

The 3.75% notes were trading at 113 versus a stock price of $42.99, according to a market source.

There was $3 million in reported volume.

Granite Construction’s stock traded to a low of $42.48 and a high of $43.07 before closing at $42.64, a decrease of 0.84%.

The company is scheduled to report earnings on Thursday.

Halozyme’s 1% convertible notes due 2028 also saw a round of activity after the company announced its earnings date.

The 1% notes gained about 1.5 points outright with the notes trading above par for the first time since March.

The notes were trading just north of par early in the session, a source said.

They were changing hands at 100.625 versus a stock price of $43.10 in the late afternoon.

There was $5 million in reported volume.

Halozyme’s stock traded to a low of $42.41 and a high of $43.49 before closing at $42.81, up 0.12%.

The biotech announced on Tuesday it would report earnings on Aug. 8.

Halozyme’s 1% convertible notes plunged as low as 86 after reporting earnings in March.

They have hovered around 90 for the majority of the second quarter but have been on a strong upward trajectory over the past two weeks.

Mentioned in this article:

American Water Works Co. Inc. NYSE: AWK

Granite Construction Inc. NYSE: GVA

Halozyme Therapeutics Inc. Nasdaq: HALO

Southern Co. NYSE: SO

Uber Technologies Inc. NYSE: UBER

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