Western Digital convertibles active; Unity Software lower; Virgin Galactic struggles

By Abigail W. Adams

Portland, Me., Jan. 18 – It was a quiet start to the week in the convertibles secondary space as the rout in Treasury and equity markets resumed.

The Dow Jones industrial average closed the day down 543 points, or 1.51%, the S&P 500 index closed down 1.84%, the Nasdaq Composite closed down 2.6% and the Russell 2000 index closed down 3.06%.

The 10-year Treasury yield shot up to a two-year high of 1.879% before closing the day at 1.876%.

However, the convertibles secondary space was quiet in the return from the long weekend with $64 million in reported volume about one hour into the session and $675 million on the tape at the market close.

“Everything’s holding,” a source said. “Nothing’s really moved.”

Western Digital Corp.’s 1.5% convertible notes due 2024 were among the most actively traded issues of Tuesday’s session although with little movement in price.

Unity Software Inc.’s 0% convertible notes due 2026 were slightly lower in active trading as stock continued its downward trajectory.

While volume in the name was light, Virgin Galactic Holdings Inc.’s 2.5% convertible notes due 2027 continued to struggle their second day in the secondary space as stock again hit a new 52-week low.

Western Digital active

Western Digital’s 1.5% convertible notes due 2024 were among the most actively traded issues during Tuesday’s session although with little movement in price.

The 1.5% convertible notes were changing hands around 101 in the late afternoon, according to a market source.

There was about $15.5 million in reported volume.

Western Digital’s stock was off alongside the broader market on Tuesday and closed the day at $64.12, a decrease of 3.78%.

However, Western Digital’s 1.5% convertible notes trade largely for their yield, which was 1% late Tuesday afternoon.

The investment-grade rated convertible notes have seen heavy volume in recent weeks.

The company recently refinanced its term loans and extended the duration of its revolving credit facility to 2027 from 2023, which were credit positives for the company, a source said.

Unity declines

Unity Software’s 0% convertible notes due 2026 continued to move lower as stock extended its downward trajectory.

The 0% notes were down about 0.75 point outright with stock off more than 4%.

The notes were changing hands at 85.5 versus a stock price of $112.67 heading into the market close.

The notes were largely unchanged dollar-neutral, a source said.

The 0% notes were now trading with a yield of 3.27%.

There was about $14.5 million in reported volume.

Unity Software’s stock traded to a high of $120.40 and a low of $112.05 before closing the day at $112.64, a decrease of 4.56%.

Virgin Galactic eyed

While volume in the name was light, Virgin Galactic’s 2.5% convertible notes due 2027 continued to struggle in the aftermarket.

The 2.5% notes fell more than 3.5 points outright with stock off more than 7%.

The 2.5% notes were changing hands at 97.25 early in the session.

They continued to trade off and were marked at 96 versus a stock price of $9.42 in the late afternoon.

While down outright, the notes were largely moving in line with stock, a source said.

Virgin Galactic’s stock traded to a high of $10.06 and a new 52-week low of $9.33 before closing the day at $9.37, a decrease of 7.59%.

The 2.5% notes have struggled since their aftermarket debut on Friday as stock has continued its downward trajectory.

Mentioned in this article:

Unity Software Inc. NYSE: U

Virgin Galactic Holdings Inc. NYSE: SPCE

Western Digital Corp. Nasdaq: WDC

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