Sea convertibles in focus after Tuesday rally; Wolfspeed notes jump; Zscaler volatile

By Abigail W. Adams

Portland, Me., Nov. 30 – The convertibles primary market remained dormant on Wednesday, despite a surge in equity markets triggered by Federal Reserve chair Jerome Powell.

The silence of the primary market was a surprise to many who have been expecting a surge in new issuance heading into the final weeks of the year.

Meanwhile, there was an uptick of activity in the secondary space as equity markets rallied after Powell signaled a slowdown in rate increases in December.

After drifting into negative territory mid-session, equity indexes catapulted into the close with the Dow Jones industrial average closing Wednesday up 737 points, or 2.18%, the S&P 500 index closing up 3.09%, the Nasdaq Composite index closing up 4.41% and the Russell 2000 index closing up 2.72%.

There was $74 million in reported volume about one hour into the session and $481 million on the tape about one hour before the market close.

Sea Ltd.’s 0.25% convertible notes due 2026 continued to see heavy volume after a trading “frenzy” into Tuesday’s close, a source said.

The notes were slightly weaker after jumping 4 points the previous session.

Wolfspeed Inc.’s recently priced 1.875% convertible notes due 2029 jumped on an outright basis as stock skyrocketed alongside the broader market.

Zscaler Inc.’s 0.125% convertible notes due 2025 were volatile in active trading with the notes under pressure early in the session but recovering into the close.

Sea ‘frenzy’

Sea’s 0.25% convertible notes due 2026 continued to see heavy trading volume on Wednesday after a “frenzy” of trading activity into Tuesday’s close.

The 0.25% convertible notes continued to trade on a 74-handle although they were slightly weaker after running up 4 points to 74.75 at Tuesday’s close.

There was heavy volume in the name at 74.75 prior to the market open with seven sellers and one buyer, a source said.

The notes were changing hands in the 74.25 to 74.75 context after the market open and were trading at 74.5 versus a stock price of $57.24 in the late afternoon.

The yield on the notes was 8.25%.

There was $21 million in reported volume in the late afternoon.

Sea’s American Depositary Shares traded to a low of $54.68 and a high of $58.56 before closing the day at $58.37, an increase of 7.57%.

The ADR space has seen a strong rebound over the past two sessions after domestic unrest in China sparked a sell-off in broader markets on Monday.

Wolfspeed jumps

Wolfspeed’s recently priced 1.875% convertible notes due 2029 jumped on an outright basis in active trading as stock erased losses from the past two sessions.

The 1.875% convertible notes climbed more than 1 point to reclaim par in the early afternoon after drifting as low as 99 the previous session.

The notes surged alongside stock in the late afternoon to trade as high as 103, a source said.

There was $12.5 million in reported volume.

Wolfspeed’s stock traded to a low of $83.38 and a high of $91.57 before closing the day at $90.92, an increase of 9.31%.

Zscaler volatile

Zscaler’s 0.125% convertible notes due 2025 were volatile in active trade on Wednesday with the notes under pressure early in the session but recovering heading into the close.

The 0.125% convertible notes were down 5 points on an outright basis with stock off more than 7% in intraday activity.

The notes were changing hands at 110.5 versus a stock price of $125.33 early in the session.

They contracted about 0.375 point on the move down, a source said.

However, the notes pared their losses alongside stock heading into the close.

The 0.125% notes traded as high as 114 late in the session, a source said.

Zscaler’s stock traded to a low of $122.13 and a high of $133.53 before ending the day at $133.45, a decrease of 1.04%.

The cyber-security firm was under pressure on the eve of its earnings report, which is scheduled to be released after the market close on Thursday.

Investor sentiment toward the cybersecurity sector soured after industry peer Crowdstrike reported a large earnings miss prior to the market open.

Mentioned in this article:

Sea Ltd. NYSE: SE

Wolfspeed Inc. NYSE: WOLF

Zscaler Inc. Nasdaq: ZS

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