Snap convertibles little moved as shares jump; Workday notes active near recent lows

By Rebecca Melvin

New York, Oct. 21 – Convertibles players started the week anticipating higher trading volume in the convertible market on earnings reports.

“Volume should pick up now with earnings getting into high gear,” a New York-based market source said.

The market was anticipating the earnings reports of Helix Energy Solutions Group Inc. and Hope Bancorp Inc. after the market close on Monday, and reports from MGIC Investment Corp., NextEra Energy Partners LP, Teradyne Inc. and Snap Inc. on Tuesday.

For one hedged market player, the Teradyne and Snap reports were seen as the most interesting of this group.

Snap shares jumped 8% to $14.58 on Monday, representing a bounce back from a drop on Friday. Snap’s $1.27 billion of 0.75% convertibles, which priced in August, appeared to underperform the move in the underlying shares. The bonds changed hands at 97.235, which was off 0.107 point on the day, according to Trace data.

The Snap shares jumped after a Credit Suisse analyst reiterated an outperform rating on the shares while increasing its price target by a buck to $21.00. Third-quarter ad revenue was predicted to be higher by $10 million after the analyst conducted advertiser checks, and Credit Suisse also boosted its 2019 earnings per share forecast to $0.28 per share from $0.26 per share. Company guidance calls for third-quarter revenue in the range of $410 million to $435 million, which should translate into adjusted EBITDA of negative $60 million to negative $85 million.

The session’s top volume issue was Workday Inc.’s 0.25% convertibles due 2022, or the series C convertible notes, which continued to trade actively after the stock and bonds plunged last week amid questions about the possibility of slower growth for the Pleasanton, Calif.-based business software company.

On Monday the C bonds were trending slightly better in relatively active trade. The Workday bond was last at 123.75 bid, 124.124 offered with shares up about 50 cents at $155.00.

That level was still near its lows following last week’s 11% plunge amid commentary among analysts covering the company, some of whom questioned growth prospects for the company’s Human Capital Management software, which is a core business. The bonds had dropped about 10 points on that day to 126.5 from 136.5.

Teva Pharmaceutical Industries Ltd.’s 0.25% convertibles due 2026 traded on light volume at 93.25 to 94 compared to 93.50 last week ahead of the opioid settlement news.

On Monday, Teva shares spiked 8.7% to $8.15 after the company announced its settlement in the case in Ohio against drug makers that are alleged to have contributed to the opioid crisis in the United States by not flagging the risks of opioid use.

Under the deal, Teva will pay $23 billion to resolve allegations against the company. The $23 billion will be a donation to fund programs to treat opioid addiction. The drug maker will also pay $250 million over 10 years to settle claims.

Also seen in trade was Twitter Inc.’s 0.25% convertible due 2024, which were up a point to 104.875 on Monday with shares of the social media company adding more than a buck, or 2.8%, to $40.09. Volume in the name was light.

Mentioned in this article:

Helix Energy Solutions Group Inc. NYSE: HLX

Hope Bancorp Inc. Nasdaq: HOPE

MGIC Investment Corp. Nasdaq: MGIC

Nextera Energy Partners LP NYSE: NEE

Snap Inc. Nasdaq: SNAP

Teradyne Inc. NYSE: TER

Teva Pharmaceutical Industries Ltd. Nasdaq: TEVA

Twitter Inc. Nasdaq: TWTR

Workday Inc. Nasdaq: WDAY

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