Wolfspeed convertibles in focus, expand post-earnings; BioMarin active; Pinduoduo rises

By Abigail W. Adams

Portland, Me., Jan. 26 – The convertibles primary market remained dormant on Thursday, a surprise to sources who had expected a more robust pipeline heading into the final days of the month.

Conversations are active and the floodgates are expected to open at some point, but the lack of a calendar thus far has been a disappointment to a market hungry for new paper, sources said.

Meanwhile, the secondary space continued to see healthy volume as accounts put money to work in outstanding issues.

Earnings and short-duration plays were in focus on a volatile day for equities.

Equity indexes wavered between gains and losses on Thursday as investors digested the latest batch of earnings and a higher-than-forecast GDP print.

However, indexes once again shrugged off intraday weakness and closed Thursday’s session with strong gains.

The Dow Jones industrial average closed up 206 points, or 0.61%, the S&P 500 index closed up 1.1%, the Nasdaq Composite index closed up 1.76% and the Russell 2000 index closed up 0.67%.

Market players responded with uncertainty to GDP data that reflected a slower economic slowdown than anticipated with investors remaining recession-wary even as the GDP print gave some credence to the soft-landing Federal Reserve officials hope for.

There was $96 million in reported convertibles trading volume about one hour into the session and $513 million on the tape about one hour before the market close with a wide range of names in play.

Wolfspeed Inc.’s 1.875% convertible notes due 2029 were in focus with the notes expanding dollar-neutral following earnings.

Short-duration notes were also in focus with BioMarin Pharmaceutical Inc.’s 0.599% convertible notes due Aug. 1, 2024 and Western Digital Corp.’s 1.5% convertible notes due Feb. 1, 2024 (Baa3) among the volume movers of the session.

Pinduoduo Inc.’s 0% convertible notes due 2025 continued to gain as their put date approaches.

Carnival Corp.’s 5.75% convertible notes due 2027 and Fiverr International Ltd.’s 0% convertible notes due 2025 were among the most actively traded issues early in the session although activity in the issues tempered as the session progressed.

Wolfspeed’s earnings

Wolfspeed’s 1.875% convertible notes due 2029 were in focus on Thursday with the notes expanding dollar-neutral as they again dropped below par with stock in the red post-earnings.

The 1.875% convertible notes fell about 1.5 point outright with stock off more than 4%.

They were changing hands at 99.125 versus a stock price of $77.51 in the late afternoon.

The notes expanded as much as 1.5 points dollar-neutral post-close on Wednesday after earnings were announced.

While they gave back most of those gains during Thursday’s session, the notes maintained a 0.375 point expansion.

“They held up well,” a source said.

Wolfspeed’s stock traded to a low of $76.84 and a high of $80.85 before closing the day at $77.09, a decrease of 6.01%.

Wolfspeed’s earnings were mixed with the semiconductor company beating bottom-line expectations but missing on the top.

Wolfspeed reported losses per share of 11 cents, narrower than the 14 cent loss expected, but reported revenue of $216.10 million versus the $226.78 million expected.

Short duration

Short-duration notes remained in demand in the secondary space with BioMarin’s 0.599% convertible notes due Aug. 1, 2024 seeing heavy volume.

The 0.599% notes were little changed as stock wobbled between nominal gains and losses on Thursday.

The 0.599% notes were seen at 111 versus a stock price of $116.34 in the late afternoon, according to a market source.

There was $12 million in reported volume.

BioMarin’s stock traded to a high of $117.11 and a low of $115.03 before closing the day at $116.98, an increase of 0.82%.

Western Digital’s 1.5% convertible notes due Feb. 1, 2024 continued to see heavy volume with the investment-grade convertible notes a safe yield play.

The 1.5% notes were wrapped around 96.6 with the yield about 5%, a source said.

The notes have long traded for their yield with little to no call optionality, a source said.

However, Western Digital’s stock has been on a tear over the past week on reports the computer drive manufacturer and data storage company was in merger talks with Japan-based Kioxia.

Stock closed Thursday at $43.76, an increase of 5.93%.

Stock has gained about 16% since Monday.

Pinduoduo’s 0% convertible notes due 2025 continued to rise with their put date less than one year away.

The 0% notes added about 1 point outright causing a 150 bps drop in the yield to put, a source said.

The notes were changing hands at 96.5 in the late afternoon with a yield of 4.375%.

They improved 0.375 point to 0.5 point dollar-neutral with the conversion premium about 77%, a source said.

Pinduoduo’s American Depositary Shares have rallied over the past month and continued to add to their gains on Thursday.

The ADSs closed Thursday at $104.66, an increase of 8.47%. They are up more than 20% in January.

The convertibles are putable on Dec. 1, 2023.

Morning trades

Carnival’s 5.75% convertible notes due 2027 and Fiverr’s 0% convertible notes due 2025 saw a round of active trading early in the session.

However, the notes were largely unchanged and activity in the issues petered out as the session progressed.

Carnival’s 5.75% convertible notes due 2027 were lower outright alongside stock.

The convertibles were trading at 110.75 versus a stock price of $10.73 early in the session, according to a market source.

The notes were changing hands at 110.5 versus a stock price of $10.65 as the session progressed.

Reported volume in the issue reached $8 million.

Carnival’s stock traded as high as $11.09 and as low as $10.57 before closing at $10.63, a decrease of 2.25%.

While slightly lower on Thursday, the notes traded up to 111, their highest outright level since pricing, the previous session.

Fiverr’s 0% convertible notes due 2025 also saw some action early Thursday.

The 0% convertible notes were trading at 84.875 early in the day with the yield about 6%, according to a market source.

By the late afternoon, the notes were seen at 84.625.

There was $8 million in reported volume.

Fiverr’s stock traded to a low of $33.77 and a high of $36.55 before closing at $34.80, down 1.42%.

Mentioned in this article:

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Carnival Corp. NYSE: CCL

Fiverr International Ltd. NYSE: FVRR

Western Digital Corp. Nasdaq: WDC

Wolfspeed Inc. NYSE: WOLF

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.