Micron’s 3% notes trade actively with shares; Splunk issues edge up on outright basis

By Rebecca Melvin

New York, Sept. 21 – Micron Technology Inc. was in focus in the convertibles market on Friday after the semiconductor company offered weak revenue and earnings guidance, citing the Trump Administration’s trade tariffs on Chinese imports as a hindrance to its business performance.

The Micron 3% convertible notes due 2043 were among the most actively traded issues of the session.

They were seeing hedged fund sellers and outright buying interest, a New York-based trader said, quoting the paper at 151 versus an underlying share price of $44.00.

The hedged players were selling the paper at parity to parity plus 10 cents.

Micron’s other convertibles were not trading notably. The trader said that Micron’s 3% notes are the lowest dollar priced convertibles of the company and therefore the issue that would hold the most appeal for outright players that wanted to add the name.

Micron stock closed down Friday at $44.74, a decrease $1.32, or 2.9% on the day. Its lower-than-expected forecast for the fiscal first quarter put revenue expectations between $7.9 billion and $8.3 billion and earnings per share between $2.88 and $3.02. The consensus was for revenue of $8.45 billion and earnings of $3.08 a share, according to FactSet.

The Boise, Idaho-based company has a plant in China where its memory modules are assembled and expects to lose profit as a result of the $200 billion in tariffs that will be imposed on Chinese goods starting Monday.

Both of Splunk Inc.’s new issues were also trading actively, and they were moving up on an outright basis with an improvement in the shares.

Splunk’s 0.5% convertibles due 2023 were seen at 100.824 with the shares in the vicinity of $117.00 on Friday afternoon, and the Splunk 1.125% convertibles due 2025 were at 100.438, according to Trace data. That compared to Thursday’s close when both issues were at 99.375 bid, 99.75 offered versus a share price of $115.25, a New York-based trader said.

Splunk was the centerpiece of this past week’s U.S convertibles action after the San Francisco-based software company launched and priced a $1.85 billion deal, which was the largest convertible deal for the year so far.

On Friday, underwriters exercised Splunk’s $277.5 million greenshoe in full, lifting the total amount of the issue to $2.13 billion.

Booking Holdings Inc.’s 0.9% convertible due 2021 was the single biggest volume issue trading on the day. Its price was seen little changed at about 117.

There were no deals heard yet for pricing next week. There is a Federal Open Market Committee meeting on the calendar for next week that might douse new issuance temporarily. But new issuance in convertibles continues to be pretty strong overall, and that trend is expected to continue, a New York-based trader said.

Issuance has been “respectable,” the trader said.

For this week Splunk was the only U.S. market convertible to price.

Glencore plc also launched and priced a $125 million tap of its cash-settled 0% convertible bonds that mature in 2025. The notes of the Baar, Switzerland-based global diversified natural resource company priced at 89, which was the low end of the talked range of 89% and 89.5% of their nominal value. But that deal was not seen trading on U.S. desks.

The original $500 million Glencore convertible priced in March at 93.25% of nominal value.

Mentioned in this article:

Booking Holdings Inc. Nasdaq; BKNG

Glencore plc OTC: GLN

Micron Technology Inc. NYSE: MU

Splunk Inc. Nasdaq: SPLK

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