Convertibles secondary quiet amid equity sell-off; SolarEdge down outright; Global Blood higher

By Abigail W. Adams

Portland, Me., Dec. 20 – It was wait-and-see in the convertibles secondary space on Monday with trading volumes light as equity markets opened the week deep in the red.

While benchmarks pared their losses heading into the close, the Dow Jones industrial average still closed the day down 433 points or 1.23%. The S&P 500 was down 1.14%, the Nasdaq Composite finished 1.24% lower and the Russell 2000 index decreased 1.57% heading into the close.

Concern over potential lockdowns from the Omicron variant and a threat to President Biden’s economic agenda were weighing down equities.

There was $44 million on the tape about one hour into the session and $300 million on the tape in the late afternoon.

“The market’s really doing nothing,” a source said.

Market players tend to “hold-tight,” amid early week sell-offs with the activity in convertible bonds to come the day after, the source said.

Players were mostly focused on their hedges, the source said.

Green energy companies were among the hardest hit on Monday with the “Build Back Better Act” considered defeated due to Sen. Joe Manchin’s (D – W.Va) opposition.

SolarEdge Technologies Inc.’s 0% convertible notes due 2025 were active and dropping on an outright basis as stock fell more than 10%.

While volume was light, Lucid Group Inc.’s 1.25% convertible notes due 2026 dropped back below par after trading as high as 102 the previous week.

However, the notes expanded on the move down.

Global Blood Therapeutics Inc.’s 1.875% convertible notes due 2028 continued to outperform with the notes again moving higher on an outright and dollar-neutral basis.

SolarEdge down outright

SolarEdge’s 0% convertible notes due 2025 dropped on an outright basis in active trading with stock under pressure during Monday’s session.

The 0% convertible notes were off about 7 points outright with stock down 10%.

The 0% notes were changing hands at 121.125 versus a stock price of $265.29 early in the session.

The notes were changing hands just shy of 122 in the late afternoon.

However, the notes were moving inline dollar-neutral, a source said.

SolarEdge stock traded to a high of $273.69 and a low of $257.32 before closing the day at $258.36, a decrease of 10.56%.

The manufacturer of power optimizers, solar inverters and monitoring systems for solar arrays’ stock was under pressure alongside the broader renewable energy sector.

Green energy companies were taking a hit with the Build Back Better Act in jeopardy.

The bill was a boon for solar energy companies with tax credits reducing the cost of solar installations by about 30%.

Lucid Group below par

While volume in the name was light, Lucid Group’s recently priced 1.25% convertible notes due 2026 dropped back below par on Monday.

The notes were off about 2 points outright with stock down 5%.

They were changing hands around 98.5 in the late afternoon.

However, the notes expanded about 0.25 point dollar-neutral on the move down, a source said.

Lucid stock traded to a high of $39.71 and a low of $36.92 before closing the day at $37.99, a decrease of 5.05%.

The 1.25% convertible notes traded as high as 102 the previous week after a disastrous secondary-market debut.

Lucid priced a $1.75 billion issue of the 1.25% notes with a discounted offer price of 99.5 on Dec. 9.

The notes traded as low as 95 and contracted 1.5 to 2 points dollar-neutral their initial days in the market.

However, the convertible notes improved alongside stock the previous week.

Global Blood gains again

Global Blood Therapeutics’ 1.875% convertible notes due 2028 continued their upward momentum on Monday.

The notes traded up to 121 on Monday.

They expanded another 1 point dollar-neutral.

Global Blood stock traded to a low of $29.50 and a high of $32.08 before closing the day at $31.26, an increase of 2.32%.

The 1.875% notes have outperformed since the company priced the $345 million issue at par on Dec. 14.

The deal priced as stock hit a 52-week low of $24.90.

Mentioned in this article:

Global Blood Therapeutics Inc. Nasdaq: GBT

Lucid Group Inc. Nasdaq: LCID

SolarEdge Technologies Inc. Nasdaq: SEDG

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