Western Digital convertibles add to gains; Rivian jumps; Confluent notes drop

By Abigail W. Adams

Portland, Me., Nov. 2 – The convertibles secondary space remained active on Thursday with equity markets strong on the heels of the Federal Open Market Committee’s announcement.

The Dow Jones industrial average closed Thursday up 565 points, or 1.7%, the S&P 500 index closed up 1.89%, the Nasdaq Composite index closed up 1.78% and the Russell 2000 index closed up 2.59%.

After a sloppy start to the week, buyers were returning to the space as markets cheered on an expected end to rate hikes.

Western Digital Corp.’s 3% convertible senior notes due 2028 remained in focus with the notes continuing to climb after a strong aftermarket debut.

Rivian Automotive Inc.’s convertible notes benefited from the renewed risk-on sentiment in the market and made strong gains in heavy volume.

While the market tone improved considerably on Thursday, earnings-related news continued to tank certain outstanding issues.

Confluent Inc.’s high-premium 0% convertible notes due 2027 fell as the cloud software company’s stock sank post-earnings.

Western Digital day 2

Western Digital’s 3% convertible notes due 2028 continued their upward momentum their second day in the secondary space after a strong aftermarket debut.

The 3% notes climbed 1 point outright with stock up 1.5%.

The convertibles were changing hands at 104.75 versus a stock price of $42.48 early in the session, according to a market source. They were seen at 104.875 in the late afternoon.

The notes continued to dominate activity in the secondary space with $41 million in reported volume.

Western Digital’s stock traded to a low of $41.83 and a high of $42.93 before closing at $42.16, up 1.01%.

Western Digital’s new notes jumped more than 3 points outright and expanded 1.25 points dollar-neutral on their aftermarket debut on Wednesday.

The notes priced with about 3 points of cheapness, a source said.

The cheapness in the deal was largely to compensate for many of the unknowns involved in Western Digital’s announced split into two independently traded companies, the source said.

Rivian rises

Rivian’s convertible notes made large gains in heavy volume on Thursday as stock jumped amid the renewed risk-on sentiment in the market.

The most recently priced 3.625% convertible notes due 2030 jumped 7 to 8 points outright with stock up more than 9%.

The notes were changing hands at 98.875 in the late afternoon, a source said.

There was $25 million in reported volume.

Rivian’s 4.625% convertible notes due 2029 jumped 9 points outright.

They were trading at 113 in the late afternoon.

There was $23 million in reported volume.

Rivian’s stock traded to a low of $16.62 and a high of $17.92 before closing at $17.59, up 9.05%.

The EV-maker’s stock has gotten crushed over the past two weeks as investors fled companies beholden to capital markets due to rate expectations.

However, the high-beta name surged as buyers returned to the market.

Rivian is scheduled to report earnings on Nov. 7.

Confluent’s earnings

Confluent’s high-premium 0% convertible notes due 2027 were under pressure as stock got nearly chopped in half on the heels of earnings.

The 0% notes fell 4 points outright.

They were changing hands at 78.375 with a yield of 7.78% about one hour into the session.

They sank to 77 at the market close.

There was $22 million in reported volume.

Confluent’s stock traded to a low of $14.69 and a high of $16.48 before closing at $16.28, a decrease of 42.13%.

While the cloud software company bested expectations with earnings, the notes sank on weak guidance.

Confluent reported earnings per share of 2 cents versus analyst expectations for losses per share of 1 cent and revenue of $200.18 million versus expectations for revenue of $195.17 million.

However, Confluent also announced it was expecting revenue of $204 million to $205 million for the fourth-quarter, well short of expectations for revenue of $212.3 million.

Mentioned in this article:

Confluent Inc. Nasdaq: CFLT

Rivian Automotive Inc. Nasdaq: RIVN

Western Digital Corp. Nasdaq: WDC

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