Spotify in focus; Southwest Airlines active; Seagate, Coinbase convertibles improve

By Abigail W. Adams

Portland, Me., April 3 – The convertible bond primary market remained dormant on Wednesday with the prospects for new issuance in the first week of the second quarter diminishing.

Sources had not expected much from the primary market with issuers in their earnings season blackouts.

However, tight credit spreads that have allowed BB-rated issuers to price straight debt on a 6%-handle may also be contributing to a slowdown in activity, a source said.

“Why price a convertible note and dilute stock when you can get a yield like that?” the source said.

While activity is expected to be light in the coming weeks, there are deals in the works with refinancings expected to continue to drive issuers to the market, sources said.

Meanwhile, it was a relatively active day in the secondary space with equity indexes either side of unchanged after the heavy selling of the previous session.

The Dow Jones industrial average closed Wednesday down 43 points, or 0.11%, the S&P 500 index closed up 0.11%, the Nasdaq Composite index closed up 0.23% and the Russell 2000 index closed up 0.54%.

There was $94 million in reported volume about one hour into the session and $550 million on the tape about one hour before the market close with the names in play diversifying after the high-grade-centric trading activity of the past two sessions.

Spotify Technology SA’s 0% exchangeable notes due 2026 topped the volume charts with the notes gaining as stock shot higher on news the media streaming service was raising prices.

Southwest Airlines Co.’s 1.25% convertible notes due May 1, 2025 (Baa1/BBB) were also active although with little movement in price.

Seagate HDD Cayman’s 3.5% exchangeable notes due 2028 had another round of heavy volume on Wednesday with the notes continuing to improve.

Coinbase Global Inc.’s 0.25% convertible notes due 2030 were also higher on the day in active trade.

Spotify in focus

Spotify’s 0% exchangeable notes due 2026 were in focus on Wednesday with the notes gaining in heavy volume alongside stock after the company announced price increases.

The 0% notes added 1 to 1.5 points outright with stock up more than 7%.

They were trading in the 92.75 to 93.25 context throughout the session, a source said.

With $22 million in reported volume, the notes were among the top traded issues in the secondary space.

Spotify stock traded to a low of $279 and a high of $293 before closing the day at $291.77, an increase of 8.23%.

Stock shot higher after the company announced it was raising prices on its music streaming service by $1 to $2 per month in several markets.

Southwest active

The high-grade trade tempered on Wednesday after investment-grade utility and energy companies dominated the tape for the past two sessions.

However, Southwest’s 1.25% convertible notes due 2025 continued to trade in heavy volume, although with little movement in price.

The 1.25% convertible notes were trading at 100.25 with stock soft during Wednesday’s session.

There was $19 million in reported volume.

Southwest stock traded to a low of $27.97 and a high of $28.28 before closing the day at $28.03, a decrease of 1.06%.

Seagate improves

Seagate’s 3.5% exchangeable notes due 2028 were one of the top traded issues of Wednesday’s session with the notes inching higher on a strong day for stock.

The 3.5% exchangeable notes added about 1.5 points outright with stock up almost 2%.

The notes were trading at 125.375 versus a stock price of $91.60 early in the session, according to a market source.

They were changing hands at 126 versus a stock price of $91.91 in the late afternoon.

There was $17 million in reported volume.

Seagate stock traded to a low of $89.65 and a high of $92.70 before closing the day at $91.63, an increase of 1.55%.

The notes made large gains last week after an analyst upgrade.

Coinbase higher

Coinbase’s 0.25% convertible notes due 2030 were also on the rise in active trade.

The 0.25% convertible notes were largely unchanged early in the session but gained outright alongside stock as the session progressed.

The notes were trading at 101.5 versus a stock price of $247 early in the session, a source said.

They were trading at 102.625 versus a stock price of $250.71 in the late afternoon.

There was $9 million in reported volume.

Coinbase stock traded to a low of $243 and a high of $256 before closing the day at $251.58, an increase of 2.33%.

Mentioned in this article:

Coinbase Global, Inc. Nasdaq: COIN

Seagate Technology Holdings plc Nasdaq: STX

Southwest Airlines Co. NYSE: LUV

Spotify Technology SA NYSE: SPOT

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