Morning Commentary: Zendesk active on earnings beat, contracts; OPKO Health up outright

By Abigail W. Adams

Portland, Me., Feb. 6 – The convertibles secondary space was active early in Wednesday’s session with earnings related news pushing some convertibles into the spotlight.

Zendesk Inc.’s 0.25% convertible notes due 2023 were in focus with the notes making large outright gains alongside stock after an earnings beat.

However, the 0.25% notes were contracting on the move.

The 0.25% convertible notes rose 8.5 points outright to 135. They were contracted 0.5 point to 0.75 point on a dollar-neutral, or hedged, basis on the move up, a market source said.

Stock was $74.49, an increase of 8.59%, shortly before 11 a.m. ET.

Outright accounts tend to sell when convertible notes hit the 135 range, a market source said, with the selling activity pushing the notes down on a dollar-neutral basis.

Zendesk stock was on the rise after the software company reported a large fourth-quarter earnings beat on both the top and bottom lines.

Zendesk reported earnings per share of 10 cents versus analyst expectations for earnings per share of 3 cents.

Zendesk reported revenue of $172.25 million versus analyst expectations of revenue of $165.6 million.

While trading volume tempered on Wednesday, OPKO Health Inc.’s 4.5% convertible notes due 2026 continued to improve early in Wednesday’s session.

The 4.5% convertible notes were trading between 102.5 and 103 with stock at $2.95 early in Wednesday’s session, a source said.

Despite a more than 15% drop in stock on Tuesday, the 4.5% notes were largely wrapped around par on their market debut.

While the notes saw a dollar-neutral expansion of upwards of 13 points based off of Monday’s $3.52 closing price of stock, the decrease in stock was priced into the notes, sources said.

Using a stock price of $2.90 to equate to par for the 4.5% notes, the notes have expanded about 2.5 points on a dollar-neutral basis, a market source said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.