Convertibles secondary quiet; volume described as ‘pitiful’; Illumina, Aerojet active

By Abigail W. Adams

Portland, Me., Oct. 2 – The convertibles secondary space was quiet on Friday with equities volatile as investors digested a series of negative headlines.

While equity benchmarks launched the day deep in the red, they pared those losses in intraday activity with the Dow Jones industrial average briefly crossing into positive territory.

However, indexes still closed the day with losses with the Dow down 134 points, or 0.48%, the S&P 500 index down 0.96% and the Nasdaq composite down 2.22%.

News of the latest jobs report, stalled stimulus talks and president Donald Trump’s positive Covid-19 test were pushing equity markets lower.

However, the convertibles secondary space was holding firm amid the volatility, a source said.

Buyers continued to be on the lookout for defensive material that would withstand a post-election market downturn, a source said.

While the market was strong and volatility was high, trading volume was “pitiful,” a source said.

There was $50 million in reported volume about one hour into the session and $339 million on the tape heading into the market close.

Few names saw concentrated trading activity.

Illumina Inc.’s 0% convertible notes due 2023 were the only issue to see more than $10 million in reported volume.

However, the notes were largely unchanged.

Aerojet Rocketdyne Holdings Inc.’s 2.25% convertible notes due 2023 saw renewed attention with the notes soon becoming callable.

SolarEdge Technologies Inc.’s 0% convertible notes due 2025 continued to rocket higher with stock again setting a new 52-week high.

Illumina active

Illumina’s 0% convertible notes due 2023 were the top volume movers during Friday’s session although the notes saw little movement in price.

They were seen changing hands at 106 – a level they have held for most of the week.

“It seems like they’re stuck in the mud,” a source said.

Illumina’s stock traded to a high of $311.78 and a low of $305 before closing the day at $308.43, a decrease of 0.38%.

Illumina’s convertible notes have been major volume movers since mid-September when news broke about the gene-sequencing company’s plan to acquire Grail Inc., a company formed when Illumina spun it off in 2016.

Stock plummeted on the news with investors concerned about the acquisition’s $7.1 billion price tag.

While stock has since recovered from the September low of $268.51, it is still down about 12% since rumors of the acquisition circulated the market on Sept. 16.

Aerojet’s call

Aerojet’s 2.25% convertible notes due 2023 were active on Friday with the notes soon to become callable.

The 2.25% notes were changing hands around 157.375 in the late afternoon.

There were more than $7 million of the bonds on the tape heading into the market close.

Aerojet’s stock was volatile on Friday, trading to a low of $38.61 and a high of $40.31 before closing the day largely flat at $40.06, a decrease of 0.1%.

The 2.25% notes become callable in December if stock continues to trade above 130% of the conversion price of $26.

However, a clause in the indenture of the convertible notes may enable the company to call the notes sooner than expected, a source said.

SolarEdge gains continue

SolarEdge Technologies’ 0% convertible notes due 2025 continued their upward momentum in active trading on Friday.

The notes traded up to 120.125 in the late afternoon, a source said.

The solar power technology company again set a new 52-week high in intraday activity on Friday, despite the sell-off in broader equity markets.

Stock traded to a high of $257.25 and a low of $239.50 before closing the day at $251.58, an increase of 1.09%.

The notes have gained more than 10 points outright over the past week as stock broke out.

However, they were largely moving in line dollar-neutral, sources said.

Mentioned in this article:

Aerojet Rocketdyne Holdings Inc. NYSE: AJRD

Illumina Inc. Nasdaq: ILMN

SolarEdge Technologies Inc. Nasdaq: SEDG

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