Convertibles secondary quiet as equities weaken; NextGen gains continue; Wolfspeed lower

By Abigail W. Adams

Portland, Me., Oct. 31 – The convertibles primary market was quiet on Monday with few rumblings about deals in the works as the market eyed another heavy week of earnings and the Federal Open Market Committee’s upcoming meeting.

The convertibles secondary space was equally quiet as equities gave back some of the strong gains made the previous week.

The Dow Jones industrial average closed Monday down 129 points, or 0.39%, the S&P 500 index closed down 0.75%, the Nasdaq Composite index closed down 1.03% and the Russell 2000 index closed flat.

The rally in risk assets over the past week has been fueled by renewed optimism over a dovish pivot by the Federal Reserve.

The market has already priced in a 75 basis point rate increase on Wednesday; however, Federal Reserve chair Jerome Powell’s comments will again be dissected to determine if the renewed optimism is warranted.

The convertibles market appeared to be in wait-and-see mode with $27 million in reported secondary trading volume about one hour into the session and $300 million on the tape about one hour before the market close, sources said.

NextGen Healthcare Inc.’s new 3.75% convertible notes due 2027 remained active with the notes continuing to add to the strong gains made on their secondary market debut last Friday.

Twitter Inc.’s convertible notes continued to see heavy volume with the notes to be soon taken out.

Wolfspeed Inc.’s 0.25% convertible notes due 2028 continued to lose ground on an outright basis after falling double digits the previous week on disappointing earnings.

NextGen gains continue

NextGen’s new 3.75% convertible notes due 2027 continued to add to its gains in active trading on Monday.

The 3.75% notes rose another 2.25 points outright with stock up more than 2%.

The convertibles were changing hands at 104.125 versus a stock price of $19.56 early in the session, according to a market source.

The notes traded up to a 105-handle as the session progressed and were seen at 105.25 versus a stock price of $20.06 in the late afternoon.

The notes expanded another 0.5 point dollar-neutral.

NextGen’s stock traded to a high of $20.16 and a low of $19.48 before closing the day at $20.04, an increase of 2.45%.

The 3.75% convertible notes rose 3 points outright and expanded 2 points to 2.5 points dollar-neutral on their aftermarket debut last Friday.

Twitter active

Twitter’s convertible notes remained active on Monday with the notes to soon be taken out following the completion of Elon Musk’s acquisition of the company.

The 0% convertible notes due 2026 were the most actively traded issue in the secondary space.

The notes were wrapped around 99.5.

There was $13 million in reported volume.

The notes will be taken out at par.

The 0.25% convertible notes due 2024 continued to trade around 112.

There was $6 million in reported volume.

The notes will be taken out in accordance with the takeout matrix.

Musk’s acquisition of Twitter last Friday marked an end to one of the most bizarre M&A sagas in the history of the market.

Twitter’s convertible notes were volatile in the months leading up to last Friday’s closing as the market questioned whether the deal would be completed.

Holders of the convertible notes “probably made out reasonably well” in the takeout, a source said.

However, that largely depends on when holders took up their position.

Wolfspeed lower

Wolfspeed’s 0.25% convertible notes due 2028 continued to lose ground on an outright basis after dropping double digits the previous week.

The 0.25% convertible notes fell 3.5 points outright with stock off more than 8% on Monday.

The notes were changing hands at 92.5 versus a stock price of $80.31 in the late afternoon.

There was $11 million in reported volume.

Wolfspeed’s stock traded to a high of $86.65 and a low of $78.56 before closing the day at $78.75, a decrease of 8.31%.

The 0.25% convertible notes fell 12 points outright in heavy volume last Thursday as stock plummeted upwards of 20% following earnings.

While the notes suffered heavy outright losses, they have largely moved in line dollar-neutral, sources said.

Mentioned in this article:

NextGen Healthcare Inc. Nasdaq: NXGN

Twitter Inc. NYSE: TWTR

Wolfspeed Inc. NYSE: WOLF

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