Twitter convertible notes dominate the tape, mixed on Musk buyout offer; Expedia active

By Abigail W. Adams

Portland, Me., April 14 – The convertibles secondary space was relatively active on what was expected to be a quiet session with one name dominating the tape – Twitter Inc.

Twitter’s convertible notes accounted for more than one-third of the total reported trading volume in the space with Tesla Inc. CEO Elon Musk once again thrusting them into the spotlight following a takeover bid for the company.

However, the tranches were mixed with the company’s high-premium 0% convertible notes due 2026 gaining on the news while the 0.25% convertible notes due 2024 came in.

Outside of Twitter, activity in the secondary space was muted as equities gave back their gains from Thursday’s rally.

The Dow Jones industrial average closed the day down 113 points, or 0.33%, the S&P 500 index closed down 1.21%, the Nasdaq Composite index closed down 2.14% and the Russell 2000 index closed down 0.92%.

There was $155 million on the tape about one hour after the market open and $477 million in reported volume heading into the market close.

“It would have been a quiet day if it wasn’t for Twitter,” a source said.

Expedia Inc.’s 0% convertible notes due 2026 (Baa3/BBB-/BBB-) were active and gaining outright with stock on the rise as the reopening trade garnered renewed interest from investors.

Twitter in focus

Twitter was once again the name of the day in the convertible secondary space on Thursday following Musk’s takeover bid for the company.

While active, the convertible notes were mixed with the high-premium notes gaining on an outright and dollar-neutral basis while the balanced convertible notes came in.

The 0% convertible notes due 2026 jumped about 4 points outright.

They were changing hands at 91 versus a stock price of $46.98 early in the session.

They came in slightly to trade at 90.875 versus a stock price of $45.81 in the late afternoon.

The notes expanded on the upward move.

There was $115 million in reported volume.

The 0.25% convertible notes due 2024 were changing hands at 109.25 versus a stock price of $47.27 early in the session.

They were trading at 107.125 versus a stock price of $45.41 in the late afternoon.

The notes were coming in dollar-neutral with the notes poised to lose on hedge on a takeout, a source said.

There was $44 million in reported volume.

Twitter’s stock was in the green despite a rough start for tech stocks with the Nasdaq Composite index down 1.15% shortly before 11 a.m. ET.

Twitter’s stock was volatile on Thursday, opening with strong gains but closing in the red.

Stock traded to a high of $48.50 and a low of $44.72 before closing the day at $45.18, a decrease of 1.42%.

Musk announced early Thursday an unsolicited bid to take Twitter private for $54.20 per share valuing the company at $43 billion.

While the market initially gave credence to the proposal, “you’re playing with fire when you’re playing with him,” a source said. “He literally could walk away at any moment.”

However, the takeout offer may force the company to consider a merger or another proposal from a friendlier bidder, a source said.

The news comes days after Musk turned down an offer to join Twitter’s board of directors.

This is the second time in as many weeks that Musk has moved Twitter’s capital structure to the upside.

Twitter’s convertible notes gained in heavy volume early last week after Musk disclosed a 9.2% stake in the company.

However, they gave back some of their gains by the close of the week as stock, which had broken above $50, gave back much of its gains.

Expedia eyed

While activity in the name paled in comparison to Twitter, Expedia’s 0% convertible notes due 2026 were active with the notes gaining outright alongside stock on the renewed strength of the reopening trade.

The 0% convertible notes rose 3 points outright with stock up more than 2%.

The notes were changing hands at 122.125 versus a stock price of $192.27 in the late afternoon.

There was $17 million in reported volume.

Expedia’s stock traded to a high of $193.51 and a low of $187.55 before closing the day at $192.17, an increase of 2.58%.

Travel names have been strong over the past two sessions following Delta Air Lines, Inc.’s earnings report, which beat analyst expectations and reflected strong travel demand.

Mentioned in this article:

Expedia Inc. Nasdaq: EXPE

Twitter Inc. NYSE: TWTR

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