John Bean convertibles skyrocket on aftermarket debut; Zscaler active; Li Auto gains

By Abigail W. Adams

Portland, Me., May 26 – The convertibles primary market was quiet on Wednesday with no new deals launched and no more expected before the week draws to a close.

There are deals in the pipeline, sources said, and a flurry of activity is expected in the return from the Memorial Day weekend.

However, the chunky, billion-dollar-plus deals from high-flying growth stocks may be a thing of the past, sources said.

Meanwhile, volume remained relatively light in the convertibles secondary space.

However, there was an uptick of activity from previous sessions with new paper making its aftermarket debut and earnings-related stock swings moving outstanding issues.

There was $551 million in reported volume about one hour before the market close, according to a market source.

In what is expected to be the last new deal of the week, John Bean Technologies Corp. priced $350 million of five-year convertible notes after the market close on Tuesday.

The new paper dominated activity in the secondary space and skyrocketed on its aftermarket debut.

Outside of recent issues, Zscaler Inc.’s 0.125% convertible notes due 2025 saw a fresh round of trading activity with the notes jumping on an outright basis as the cybersecurity company’s stock surged following its first-quarter earnings report.

Li Auto Inc.’s 0.25% convertible notes due 2028 were also active with the notes making large outright and dollar-neutral gains on the heels of its earnings report.

John Bean surges

John Bean Technologies priced $350 million of five-year convertible notes after the market close on Tuesday at the midpoint of talk with a coupon of 0.25% and an initial conversion premium of 32.5%, according to a company news release.

Price talk was for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%, according to a market source.

In the secondary market, the 0.25% convertible notes were changing hands in a range of 104.5 to 105.5 with stock up more than 5% early in the session.

The convertibles continued to trade around 105 heading into the afternoon.

The notes expanded 2.5 to 3 points on hedge, a source said.

There was more than $97 million in reported volume heading into the market close.

John Bean’s stock traded to a high of $141.98 and a low of $130 before closing the day at $141.89, an increase of 10.79%.

Zscaler in action

Zscaler’s 0.125% convertible notes due 2025 were active with the note surging on an outright basis.

The notes were up more than 10 points outright as stock jumped more than 13%.

The 0.125% notes were changing hands at 145.625 early in Wednesday’s session.

Volume in the name petered out as stock gave back its early gains heading into the afternoon.

However, there were some scattered trades around 144.5 heading into the market close.

The notes were seen as unchanged dollar-neutral early in the session, a source said.

However, another source saw them improved about 0.5 point dollar-neutral in the late afternoon.

There was $18 million in reported volume about one hour before the market close.

Zscaler’s stock traded to a high of $199.77 and a low of $191.50 before closing the day at $194.20, an increase of 12.42%.

Stock surged after the cybersecurity company reported third-quarter earnings and gave upbeat guidance.

Zscaler reported earnings per share of 15 cents versus analyst expectations for earnings per share of 7 cents.

Revenue was $176.4 million versus analyst expectations for revenue of $163.7 million.

Forward guidance also topped expectations with Zscaler expecting revenue of $186 million versus analyst expectations for revenue of $174.4 million.

Li Auto improves

Li Auto’s 0.25% convertible notes due 2028 were making large gains on an outright and dollar-neutral basis following the Beijing-based electric vehicle manufacturer’s earnings report.

The notes rose more than 7 points outright with stock up almost 15%.

The 0.25% convertible notes were changing hands at 105.5 versus an equity price of $23.06 in the late afternoon.

They expanded upwards of 1.5 points dollar-neutral, a source said.

Li Auto’s ADSs traded to a high of $23.40 and a low of $19.85 before closing the day at $22.82, an increase of 14.16%.

Wednesday marked the highest outright level for the 0.25% notes since Li Auto priced the $862.5 million issue in early April.

Wednesday also marked the first time the notes traded above par since shortly after pricing.

While the 0.25% notes were initially strong in the aftermarket, they quickly tanked alongside Li Auto’s ADSs as the equity of several China-based companies came under pressure amid renewed tensions between the U.S. and China and China president Xi Jinping’s crackdown on the country’s tech behemoths.

The 0.25% notes traded as low as 89 about two weeks ago, according to Trace data.

However, the convertible notes and Li Auto’s equity surged following its earnings report.

Li Auto reported a loss per share of 3 cents versus analyst expectations for a loss of 2 cents. However, the company reported revenue of $546 million versus analyst expectations for revenue of $530 million.

While earnings were mixed, the company forecast that it will sell 10,000 cars a month beginning in September, Reuters reported.

Mentioned in this article:

John Bean Technologies Corp. NYSE: JBT

Li Auto Inc. Nasdaq: LI

Zscaler Inc. Nasdaq: ZS

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