Convertibles secondary market quiet as equity sell-off intensifies; Twitter notes active

By Abigail W. Adams

Portland, Me., April 22 – It was a quiet day in the convertibles secondary space on Friday as the sell-off in equity markets intensified.

The Dow Jones industrial average closed the day down 981 points, or 2.82%, the S&P 500 index closed down 2.77%, the Nasdaq Composite index closed down 2.55% and the Russell 2000 index closed down 2.55%.

Federal Reserve chairman Jerome Powell’s Thursday confirmation about an aggressive rate hike schedule further pressured equity markets.

“There’s a lot of nervousness out there,” a source said.

However, holders of convertible notes were holding tight with the pressure in equities not yet translating into selling activity in the space, a source said.

There was $326 million of convertibles trading on the tape about one hour before the market close with few names seeing concentrated activity.

Twitter Inc.’s convertible notes were in focus on an otherwise quiet day.

The notes were making gains on an outright basis with the social media company’s stock one of the few names in the green during Friday’s session.

Wayfair Inc.’s 0.625% convertible notes due 2025 hit a new all-time low as stock tanked with investors abandoning the stay-at-home trade following Netflix’s earnings.

Twitter gains

Twitter’s convertible notes were active and making gains on an outright basis with the social media company’s stock on the rise despite a brutal day for equity markets.

The company’s 0% convertible notes due 2026 dominated activity on an otherwise quiet day in the secondary space.

The 0% convertible notes were changing hands at 91.375 early in the session.

They remained on a 91-handle throughout the session with Twitter’s stock maintaining gains as the selling in broader equity markets intensified.

The 0% notes were changing hands at 91.25 versus a stock price of $84.17 in the late afternoon.

The notes were moving in line to slightly improved on a dollar-neutral, or hedged, basis.

There was $28 million in reported volume heading into the market close.

Twitter’s 0.25% convertible notes due 2024 gained almost 2 points outright and were trading at 111.25 versus a stock price of $49.10 in the late afternoon.

There was about $6 million in reported volume.

Twitter’s stock traded to a low of $47.49 and a high of $49.73 before closing the day at $48.93, an increase of 3.95%.

Twitter’s convertible notes have been in focus since Tesla Inc. CEO Elon Musk disclosed his stake in the company and launched a hostile takeover bid.

Musk announced on Thursday he had lined up $46.5 billion in financing to support his takeover effort.

Wayfair down

Wayfair’s 0.625% convertible notes due 2025 also saw high volume activity with the notes down as stock outpaced the losses of the broader market.

The 0.625% notes fell 1 point with stock down more than 8%.

The notes were changing hands at 78 versus a stock price of $85.49 in the late afternoon.

Wayfair’s stock traded to a high of $93.24 and a low of $83.76 before closing the day at $85.23, a decrease of 8.09%.

The home decor e-commerce company’s stock has lost more than 20% since Netflix reported earnings after the market close on Tuesday.

Netflix’s stock was crushed following earnings with stock now off almost 70% from its 52-week high.

The results dragged down other stay-at-home darlings, such as Wayfair.

Wayfair is scheduled to report earnings on May 5 with expectations for a loss per share of $1.49.

Mentioned in this article:

Twitter Inc. NYSE: TWTR

Wayfair Inc. NYSE: W

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