Proofpoint active after debut; Splunk convertible notes expand modestly amid share drop

By Rebecca Melvin

New York, Aug. 22 – Convertibles on Thursday saw some follow-on trading in the new Proofpoint Inc. 0.25% convertibles, which debuted in the market on Wednesday, and Splunk Inc.’s convertibles were active after the San Francisco-based software company reported earnings.

There was also a big block of Transocean Ltd.’s 0.5% convertibles that traded in line, according to one market source. The trading activity looked to have been originating from a single seller and five or six buyers, the source said.

Elsewhere, secondary market activity was light as the dog days of summer continue, and mandatories and preferred convertibles were pretty quiet, a second market source said.

No new issues were heard to be announced.

Splunk’s A tranche was showing modest expansion of about 0.125 point versus the close, with the stock down sharply in the early going, a New York-based trader said. The Spunk B tranche was not seeing much expansion either, the trader said.

The trader added that the move was not surprising given frothiness that had developed in the valuation of late.

Splunk shares were down $13.41, or 10.4% to $115.06 in late morning trade, and they closed down $10.05, or nearly 8%, at $118.41. The company’s second-quarter earnings per share and revenue beat estimates and the company also raised full-year revenue guidance and announced it is buying out SignalFx for $1.05 billion. Nevertheless, free cash flow figures were disappointing, according to a few analysts.

As for new issuance, “I think PFPT is the last one we’re likely to see until after Labor Day,” the trader said, referring to the new $800 million convertible issued by Proofpoint that debuted in the secondary market on Wednesday.

That deal did notably well, expanding 2.75 points to 3 points. But despite its success, no other issuers waded into the market in its wake.

The notes saw some follow through volume on Thursday and traded last at 104.25, according to Trace data. The underlying shares the Sunnyvale, Calif.-based cybersecurity company closed down $1.56, or 1.3%, at $116.04.

The notes had traded up to as high as 104.63 on an outright basis on Wednesday after the upsized $800 million of five-year notes priced at the rich end of coupon talk and midpoint of talk for the premium.

Meanwhile, underwriters for Akamai Technologies Inc.’s 0.375% convertible notes due 2027 fully exercised their $150 million greenshoe, lifting the total size of the deal to $1.15 billion.

Akamai priced $1 billion of the convertibles after the market close on Aug. 14 at par, and those notes have been seeing a good amount of trading activity since.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

Proofpoint Inc. Nasdaq: PFPT

Splunk Inc. Nasdaq: SPLK

Transocean Ltd. NYSE: RIG

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