Cannabis convertibles trade higher with shares; Square surges; Elanco notes active

By Rebecca Melvin

New York, Nov. 6 – Convertibles traded actively, especially in pockets of the market, as gains in equities tailed off on Friday as former vice president Joe Biden overtook president Donald Trump in the tally of votes in Pennsylvania and Georgia, states in which Trump was initially leading.

But the vote count continued for a fourth day as equities finished their best week since April. For the week, the Dow Jones industrial average closed up 6.93%, the S&P 500 rose 7.3% and the Nasdaq Composite was up 9%.

Cannabis was a busy area in convertibles on Friday, according to one market source.

When asked to characterize the week’s trading, one market source summarized it by saying the market was being “very volatile around the elections.”

Aurora Cannabis Inc.’s convertibles were up more than 5 points to nearly 57 as its underlying shares surged on Friday. The industry received a boost on Tuesday when voters in New Jersey, Montana, South Dakota, and Arizona all passed laws to legalize marijuana for recreational use. The industry also stands to gain from a Biden White House as the Democratic party has previously said marijuana should be decriminalized at the federal level. The 5.5% Aurora notes due 2024 followed the Edmonton, Alta.-based company’s stock, which rose $3.57, or 57.4%, to $9.87.

Tilray Inc.’s $475 million of 5% convertibles due 2023 were also very active on Friday and changed hands at 40 with stock up about 25%. The shares of the Nanaimo, B.C.-based medical cannabis company were last up $1.63, or 20.8%, at $9.50.

Aphria Inc., another Canadian medical marijuana company with a $350 million convertible, saw its shares spike nearly 8% in the early going. The 5.25% convertibles due 2024 had been a “busted convert,” which traded with a 70 handle in early October.

The stock was up 42 cents, or 7.7%, at $5.88 around midsession on Friday. But it retraced gains to end up only 4 cents, or 0.7%, at $5.50. On Oct. 5, the convertible traded at 78 with the stock at $4.86.

Elsewhere on Friday, Square Inc.’s 0.5% convertibles due 2023 jumped 25 points outright on Friday. The shares were trading up about $20, or 11.5% around midsession, and closed higher by 13% at $198.08.

The Square 0.275% notes due 2022 were quiet at Thursday’s closing price of 760.1.

The financial tech company reported strong earnings and Bitcoin revenue for the first time.

Elanco Animal Health Inc. saw its mandatory preferreds trading actively, and the company’s bonds were trading also, albeit on light volume for that paper, according to a market source. The common stock fell more than 10% post earnings. But it curbed losses to end down only 7%.

The Greenfield, Ind.-based provider of medicine and vaccines for pets and livestock reported earnings that edged estimates, but its guidance for sales missed expectations.

The Elanco 5% mandatory convertible preferreds due 2023 traded down 4.75 points to $45.26. The $550 million issue, which priced in January, traded as high as $49.39 and as low as $43.84 during the session. The company’s common shares were down $3.62, or 11%, at $28.95 at late morning.

Its adjusted earnings were 13 cents per share on $889.6 million of sales in the third quarter. It was estimated to have posted profit of 11 cents per share on $909.3 million. For the fourth quarter, the company’s earnings are expected to fall 22%.

The company said the Covid-19 pandemic curtailed revenue by about $35 million last quarter, mostly in its farm animal unit.

Workiva Inc. traded early at a price even higher than on Thursday when the 1.125% convertibles due 2026 moved up more than 10 points to nearly 113. On Friday the paper traded at 113.286, against shares that also extended gains, trading last at $69.65, which was up 90 cents, or 1.3%, on the day.

The Ames, Iowa, cloud-based financial accounting platform reported quarterly revenue and earnings that beat estimates. The company eked out earnings of 4 cents a share compared to a predicted loss of 12 cents per share. Workiva shares have added about 35% since the beginning of the year versus the S&P 500’s gain of 4.3%.

Mentioned in this article:

Aurora Cannabis Inc. NYSE: ACB

Aphria Inc. Nasdaq: APHA

Elanco Animal Health Inc. NYSE: ELAN

Tilray Inc. Nasdaq: TLRY

Square Inc. NYSE: SQ

Workiva Inc. NYSE: WK

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