Lumentum convertible notes price, volatile on aftermarket debut; Innoviva sinks further

By Abigail W. Adams

Portland, Me., March 4 – It was a relatively quiet day in the convertibles secondary space on Friday as equities extended their losses with the exception of one name – Lumentum Holdings Inc.

Lumentum priced $750 million of convertible notes due June 15, 2028 after the market close on Thursday.

The new paper dominated activity in the secondary space, accounting for $119 million of the $529 million in reported volume about one hour before the market close.

The notes were volatile early in the session and swung between outright gains and losses before closing the day well below par.

While down outright, the notes were expanding dollar-neutral, a source said.

Lumentum’s 0.5% convertible notes due 2026 were also active with the notes continuing to come in on the heels of the new offering.

While volume in the name was light, Innoviva Inc.’s newly priced 2.125% convertible notes due 2028 dropped further below par as stock continued its downward trajectory.

Innoviva and Lumentum were the only two deals to clear the convertibles primary market over the past week.

Their poor performance in the aftermarket did not bode well for future issuance with many waiting for markets to stabilize before launching deals, sources said.

The volatility in equities continued on Friday with indexes in the red following reports that Russia had attacked Europe’s largest nuclear power plant in the Ukraine.

While indexes rallied at the end of the session to close the day off their lows, the Dow Jones industrial average still closed down 180 points, or 0.53%, the S&P 500 index closed down 0.79%, the Nasdaq Composite closed down 1.66% and the Russell 2000 closed down 1.55%.

“Nobody wants to carry risk into the weekend,” a source said.

Lumentum volatile

Lumentum priced $750 million of convertible notes due June 15, 2028 after the market close on Thursday at par with a coupon of 0.5% and an initial conversion premium of 32.5%.

Pricing came at the midpoint of talk for a coupon of 0.375% to 0.875% and at the rich end of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.

The new paper dominated activity in the secondary space, accounting for almost 1/5 of the reported trading volume in the space.

The notes were volatile early in the session and traded to a high of 101 and a low of 98.5 within one hour of the opening bell.

The notes were changing hands at 99 versus a stock price of $96.25 about one hour into the session, according to a market source.

However, they continued to trade down as stock dropped alongside the broader market.

The notes were changing hands at 96.75 versus a stock price of $91.37 in the late afternoon.

While down outright, the notes expanded about 0.25 point on the move down, a source said.

Lumentum’s 0.5% convertible notes due 2026 continued to come in on an outright basis.

The notes were off about 4.5 points outright with stock down about 5.5%.

Lumentum’s stock traded to a high of $98.44 and a low of $90.94 before closing the day at $93.33, a decrease of 5.62%.

Innoviva day two

Innoviva’s 2.125% convertible notes due 2028 dropped further below par on Friday as stock continued a downward trend.

However, volume in the name was light.

The 2.125% notes were changing hands at 95.5 versus a stock price of $17.48 early in the session.

Stock traded to a high of $17.96 and a low of $16.89 before closing the day at $17.25, a decrease of 3.63%.

The 2.125% notes struggled on an outright basis on their aftermarket debut on Thursday. While the notes traded as high as 102, they closed the day at 97.25.

However, the notes expanded 0.25 to 0.5 point dollar-neutral on debut.

Mentioned in this article:

Innoviva Inc. Nasdaq: INVA

Lumentum Holdings Inc. Nasdaq: LITE

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