Morning Commentary: Super Micro Computer convertibles hold onto gains in early trade

By Abigail W. Adams

Portland, Me., Feb. 26 – The convertibles primary market was quiet early Monday, but sources expect a busy week ahead with several deals heard to be in the pipeline.

The secondary space remained active with the almost $5 billion in new supply that priced the previous week continuing to dominate the tape.

Equity indexes were flat to up slightly early Monday as markets stared down a heavy week of macro data with quarterly GDP figures out on Wednesday and the Personal Consumption Expenditure report due on Thursday.

The Dow Jones industrial average was up 29 points, or 0.08%, the S&P 500 index was down 0.04%, the Nasdaq Composite index was up 0.19% and the Russell 2000 index was up 0.58%.

There was $100 million in reported convertible bond trading volume about one hour into the session with Super Micro Computer Inc.’s 0% convertible notes due 2029 accounting for nearly one-quarter of the activity in the space.

The 0% convertible notes held onto the spectacular dollar-neutral gains made on debut with the trading level of the notes leveling off alongside stock.

The 0% notes were changing hands at 101.25 versus a stock price of $840.64 early in the session, according to a market source.

There was $21 million in reported volume.

Super Micro’s stock leveled off after the phenomenal volatility of the past two trading sessions.

Stock was trading at $855.50, a decrease of 0.52%, shortly before 11 a.m. ET.

Super Micro’s stock deflated about 12% as the 0% convertible notes made their aftermarket debut last Friday.

The notes logged dollar-neutral gains of as much as 7 points on the stock move, a source said.

Stock dropped after logging gains of 30% last Thursday as the 0% convertible notes priced.

The convertible notes offering played to strong demand, especially from hedge accounts.

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