ZTO convertibles gain in heavy volume; Workday notes active; Affirm under pressure

By Abigail W. Adams

Portland, Me., Aug. 26 – Trading activity was muted in the convertibles secondary space on Friday as the markets digested the latest comments from Federal Reserve chair Jerome Powell.

Equity indexes were slightly negative leading into Powell’s speech and pared some losses while he spoke.

“Then reality set in,” a source said. “They’re going to keep raising rates.”

The Dow Jones industrial average closed Friday down 1,008 points, or 3.03%, the S&P 500 index closed down 3.37%, the Nasdaq Composite index closed down 3.94% and the Russell 2000 index closed down 3.3%.

There was $272 million in reported volume in the late afternoon with ZTO Express’ newly priced 1.5% convertible notes due 2027 continuing to dominate the tape.

The 1.5% convertible notes continued to gain outright and expanded dollar-neutral as the company’s equity posted gains despite the selling pressure in the market.

Workday Inc.’s soon-to-mature 0.25% convertible notes due Oct. 22, 2022 were active with the notes trading around parity following earnings with the notes averaging period slated to begin soon.

Affirm Holdings Inc.’s 0% convertible notes due 2026 were under pressure as stock plummeted double digits post-earnings.

ZTO in focus

ZTO Express’ 1.5% convertible notes due 2027 continued to dominate the tape on Friday with the notes adding outright and expanding dollar-neutral as equity remained in the green despite the selling pressure in the market.

The 1.5% convertible notes were up 1.5 points outright to change hands at 103.25 versus a stock price of $25.66 early in the session, according to a market source.

The notes came in alongside stock as the session progressed and were seen at 102.675 versus a stock price of $25.43 in the late afternoon.

The notes expanded Ľ to 3/8 point dollar-neutral after falling flat on swap on their secondary market debut on Thursday.

The notes move on a 60% delta, a source said.

There was $45 million in reported volume.

ZTO’s American Depositary Shares traded to a low of $25.13 and a high of $26.07 before closing the day at $25.66, an increase of 1.66%.

While broader markets were deep in the red on Friday, the ADR space was strong following news the United States and China had reached an agreement over the auditing of Chinese firms to prevent their delisting.

Workday active

Workday’s soon-to-mature 0.25% convertible notes due Oct. 22, 2022 were active with the notes trading around parity following earnings as they prepare to enter into their averaging period.

The 0.25% convertible notes were changing hands just shy of 118 versus a stock price of $177.50 early in the session.

They fell to 113.375 versus a stock price of $166.81 in the late afternoon.

There was $10 million in reported volume.

Workday’s stock traded to a high of $178.56 and a low of $165.52 before closing the day at $166.46, an increase of 2.53%.

Workday’s stock saw gains following earnings despite the pain in the broader market on Friday.

The software company reported fiscal second-quarter earnings of 83 cents per share versus analyst expectations for earnings of 80 cents.

Revenue was $1.54 billion versus analyst expectations for revenue of $1.52 billion.

Affirm under pressure

Affirm’s already struggling 0% convertible notes due 2026 fell further as stock plummeted following earnings.

The 0% convertible notes were down about 1.75 points outright as stock plummeted more than 20%.

The notes were changing hands at 63.875 versus a stock price of $24.63 in the late afternoon, according to a market source.

There was $9 million in reported volume.

Affirm’s stock traded to a high of $28.80 and a low of $24.05 before closing the day at $24.57, a decrease of 21.33%.

Stock plummeted after Affirm announced losses per share of 65 cents for the fourth-quarter versus analyst expectations for losses of 58 cents.

Revenue was $364.1 million versus analyst expectations for revenue of $355 million.

The buy-now-pay-later firm also missed expectations with its forward guidance with the company expecting revenue of $1.6 billion to $1.7 billion in fiscal year 2023 versus analyst expectations for $1.9 billion.

Mentioned in this article:

Affirm Holdings Inc. Nasdaq: AFRM

Workday Inc. Nasdaq: WDAY

ZTO Express NYSE: ZTO

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