Zendesk convertibles plunge in line with shares; Sunrun edges higher; primary quiet

By Rebecca Melvin

Concord, N.H., Oct. 29 – Zendesk Inc.’s convertibles plunged in line with the underlying shares on Friday in extremely active trading after the San Francisco-based customer service software company posted earnings and an all-stock acquisition.

But market tone was firm overall as U.S. stock markets rose to another record. The Dow Jones industrial average added 89.08 points, or 0.25%, to finish at 35,819.56; the S&P 500 index added 0.19% to close at 4,605.38; and the Nasdaq Composite rose 0.33% to close at 15,498.39. All three closed at record highs.

The primary market remained quiet, and new issuance activity has been exceptionally quiet all month.

Sunrun Inc.’s 0% convertibles due 2025 traded at 91.262, which was up 1.1 points as Sunrun shares added $1.66, or 2.96%, to $57.68 on Friday. The shares are down more than 17% year to date, however.

The San Francisco-based provider of solar panels and home batteries is expected to release earnings on Nov. 4. A year-over-year decline in earnings on higher revenues is expected for the quarter ended September 2021. According to Zacks Consensus Estimate, the company is expected to post quarterly earnings of $0.07 per share, which represents a year-over-year change of negative 75%.

Medallia Inc.’s 0.125% convertibles due 2025 traded a bit on Friday but closed unchanged at 108 as the shares of the San Francisco-based customer feedback management software developer ceased to trade on the New York Stock Exchange. The company announced that its anticipated acquisition by Thoma Bravo in an all-cash transaction valued at $6.4 billion was closed. Shareholders will receive $34.00 per share in cash for their holdings.

Medallia priced $575 million of the five-year convertible bonds on Sept. 15 against a $29.15 stock price. The bonds had dropped below par to 99 shortly after pricing but retained a dollar-neutral expansion of about 3 points at that time.

Zendesk gaps lower

The Zendesk 0.625% convertibles due 2025, of which $1 billion priced in June, fell 18 points to 114.332 by about 11 a.m. ET and to as low as 112.621, before recouping several points and closing at 118.44, according to Trace data.

Shares of the company were down $24.87, or 20.9%, to $94.14 at approximately the same time. At 11:15 a.m. ET, the shares were down at $94.37, or 20.7% and hit a low of $92.00 before recouping and closing the session at $101.80, which was down $17.25, or 14.5%.

There were $76.57 million of Zendesk convertible bonds that changed hands by about 11 a.m. ET, which accounted for more than half of total convertibles market trading. In all, $150.52 million of convertible bonds had changed hands at that time.

The company’s shares were soft this past week and solid earnings numbers did nothing to help out on analyst expectations. But the company also announced that it is acquiring Momentive Global Inc. in a $4.1 billion all-stock deal, representing a 12% premium to Momentive’s closing share price on Thursday.

Mentioned in this article:

Medallia Inc. NYSE: MDLA

Sunrun Inc. Nasdaq: SUN

Zendesk Inc. Nasdaq: ZEN

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