Virgin Galactic skyrockets outright, contracts on swap; Sea active; Innoviva gains

By Abigail W. Adams

Portland, Me., Feb. 15 – The convertibles primary market remained dormant on Tuesday despite the improved tone to the market as equity indexes turned positive amid easing geopolitical tensions in the Ukraine.

The Dow Jones industrial average closed the day up 423 points, or 1.22%, the S&P 500 index closed up 1.58%, the Nasdaq Composite index closed up 2.53% and the Russell 2000 index closed up 2.66%.

Small cap and tech stocks outperformed on Tuesday while the 10-year Treasury yield pushed back above 2%.

The 10-year Treasury yield closed Tuesday at 2.048%.

While the tone in the convertibles secondary space was markedly improved on Tuesday, trading activity remained light.

There was $76 million in reported volume about one hour into the session and $465 million on the tape about one hour before the close.

Virgin Galactic Holdings Inc.’s 2.5% convertible notes due 2027 were in focus in the secondary space with the notes skyrocketing outright.

While the notes topped par for the first time since pricing in mid-January, they contracted on the move up, a source said.

Sea Ltd.’s 0.25% convertible notes due 2026 continued to see high-volume activity as the company’s equity rebounded.

Earnings-related volatility also sparked some activity in off-the-run issues.

Innoviva Inc.’s 2.5% convertible notes due 2025 were on the rise with stock up double digits since its earnings report last week.

Omnicell Inc.’s 0.25% convertible notes due 2025 sank alongside stock following earnings.

Virgin Galactic skyrockets

Virgin Galactic’s 2.5% convertible notes due 2027 returned to focus and skyrocketed on an outright basis alongside stock as the company opened ticket sales for space tourism.

The 2.5% notes jumped about 10 points outright with stock up 32% on the news.

However, the notes contracted on the move up.

The 2.5% notes were changing hands at 101.5 versus a stock price of $10.62 in the late afternoon.

They were down about 1 point dollar-neutral, a source said. However, the notes were trading rich prior to Wednesday’s move.

Virgin Galactic’s stock traded to a low of $8.75 and a high of $10.97 before closing the day at $10.74, an increase of 32.10%.

The space tourism company announced that it would open ticket sales on Wednesday with prices starting at $450,000.

Virgin Galactic’s $425 million offering of 2.5% convertible notes due 2027 was the first deal of the year and got pummeled in secondary market activity.

The notes, which priced at par off of the company’s 52-week low, sank to the low 80s shortly after pricing.

The notes closed the previous week at 89, a source said.

Sea active

Sea’s 0.25% convertible notes due 2026 remained active as the company’s equity rebounded from the sell-off the previous session.

The 0.25% notes rose about 1 point outright.

They were changing hands at 83.375 versus an equity price of $145.07 in the late afternoon.

However, the high-premium notes were moving in line dollar-neutral, a source said.

There was $13 million in reported volume.

Sea’s American Depositary Shares traded to a low of $133.27 and a high of $149.80 before closing the day at $149.55, an increase of 15.89%.

Sea’s equity recouped most of its losses from Monday’s headline induced sell-off.

The Singapore-based global consumer internet company’s equity fell more than 18% on Monday following news India had banned its most popular video game title.

Innoviva gains

Innoviva’s 2.5% convertible notes due 2025, an off-the-run issue rarely seen on the tape, were active and posting gains on an outright basis with stock on an upswing following last week’s earnings.

The 2.5% convertible notes were changing hands at 132.5 versus a stock price of $19.83 early in the session.

They continued to trade around 132 in the late afternoon.

The notes were trading at about a 15-point premium to parity, a source said.

There was $9 million in reported volume.

Innoviva’s stock was wavering between gains and losses following a strong move post-earnings.

The shares traded to a high of $20.10 and a low of $19.58 before closing the day at $19.69, a decrease of 0.10%.

While the stock closed Tuesday in negative territory, it has risen about 24% since the biotech company reported earnings last week.

Omnicell down

Omnicell’s 0.25% convertible notes due 2025, another off-the-run issue that rarely trades in volume, was active during Tuesday’s session with the notes dropping alongside stock following the health care technology company’s earnings report.

The 0.25% convertible notes fell 10 points outright in active trading.

They were changing hands at 148 in the late afternoon and stood poised to close the day wrapped around 150.

There was $12 million in reported volume.

Omnicell’s stock plunged as much as 19% early in the session before paring its losses.

The shares traded to a low of $119.30 and a high of $143 before closing the day at $139.55, a decrease of 5.45%.

Stock was under pressure following an earnings miss and disappointing guidance.

Mentioned in this article:

Innoviva Inc. Nasdaq: INVA

Omnicell Inc. Nasdaq: OMCL

Sea Ltd. NYSE: SE

Virgin Galactic Holdings Inc. NYSE: SPCE

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