Convertibles lower outright but mostly flat on swap in active trade; Karyopharm prices

By Rebecca Melvin

New York, Oct. 11 – U.S. convertibles moved lower on Thursday on an outright basis but were mostly in line, or flat, on hedged basis as equity markets succumbed to another downdraft, pushing indexes down another 1.3% to 2%.

“Everything is very orderly; [convertibles are] moving dollar neutral for the most part,” a New York-based market source said.

Much of the damage occurred in a few names.

Square Inc.’s deep in-the-money convertibles were hard hit as the underlying shares fell 11% after news that the financial-technology company’s chief financial officer, Sarah Friar, is leaving to become the chief executive at social network Nextdoor. Square shares fell $8.42, or 11%, to $69.03.

Tilray Inc. was another casualty, and those new convertibles were down to 92 as shares moved lower again – which has been the trend since the $450 million convertible issue priced. Tilray shares lost another $4.85, or 3.6%, to $131.95 on Thursday.

Volumes were elevated. But much of the space was moving the way it should be on swap, a market source said.

Sources queried didn’t have the new Karyopharm Therapeutics Inc. convertibles on their radars. Karyopharm priced $150 million of 3% convertibles due 2025 late Wednesday at par, which was the cheap end of coupon talk.

It wasn’t known how the convertible was trading, but Karyopharm shares were moving lower again early Thursday after plunging 20% on Wednesday. At one point they were down 2.2% at $12.16, but they ended higher by little more than a penny at $12.45.

The new 2025 notes priced at par on Wednesday to yield 3% and with a 27.5% initial conversion premium. They priced at the cheap end of 2.5% to 3% coupon talk and at the midpoint of 25% to 30% initial conversion premium talk.

The stock markets remained the central focus of convertibles players.

A sharp drop lower in U.S. equities on Wednesday spread to global equity markets overnight, and there was further selling in U.S. markets on Thursday.

The Dow Jones industrial average fell another 545.91 points, or 2.1%, to 25,052.83, on top of an 831 point drop on Wednesday. The S&P 500 stock index fell 57.31 points, or 2.1%, to 2,728.37 and the Nasdaq Composite index lost 92.99 points, or 1.3%, to 7,329.06.

U.S. Treasuries edged up, pushing the yield on the benchmark 10-year Treasury down slightly to 3.15%.

Mentioned in this article:

Karyopharm Therapeutics Inc. Nasdaq: KPTI

Square Inc. NYSE: SQ

Tilray Inc. Nasdaq: TLRY

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