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Morning Commentary: Avaya’s 2.25% convertibles expand; Chegg continues to struggle
By Abigail W. Adams
Portland, Me., March 25 – The convertible secondary market was quiet early in Monday’s session as equities again opened the day with losses.
The Dow Jones industrial average opened the day down more than 100 points but turned positive and was up by 14 points before 11 a.m. ET.
Most people were on the sidelines early in the session waiting to see what kind of a day it would be for the markets, a source said.
However, Avaya Holdings Corp.’s 2.25% convertible notes due 2023 saw high-volume activity with the notes making gains on both an outright and dollar-neutral basis as stock soared early Monday.
The 2.25% convertible notes rose about 10 points outright. They were seen changing hands at 94.25 early in the session.
The notes were expanded about 1 to 2 points dollar-neutral based on the delta used, a source said.
Avaya Holdings stock was $17.75, an increase of 34.37%, shortly before 11 a.m. ET.
The telecommunications equipment and software vendor’s stock soared after news surfaced that the company was considering a leveraged buyout offer from an unidentified private equity firm.
The offer values the company at more than $5 billion, including debt, and more than $20.00 a share.
Meanwhile, Chegg Inc.’s 0.125% convertible notes due 2025 continued to struggle early in the session.
The notes were unchanged from Friday’s close and continued to hover around 97.
Chegg stock was volatile early in Monday’s session and traded to a low of $36.07 and a high of $37.06. Stock was $36.85, an increase of 0.24% shortly before 11 a.m. ET.
The 0.125% notes, which priced at par, took a hit on their market debut on Friday.
While the notes were holding on swap, outright accounts were feeling the pain with the notes trading down 3 points as stock tanked after the release of a short-seller report.
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