Omnicell tanks outright, expands dollar-neutral; Chegg gains; Bandwidth up on buyback

By Abigail W. Adams

Portland, Me., Nov. 2 – It was a quiet day in the convertibles secondary space as the market awaited the Federal Open Market Committee’s afternoon announcement on interest rates and the market response.

And the response was not positive.

The renewed optimism about a dovish pivot from the Fed that fueled the surge in risk assets the previous week proved to be unfounded as chair Jerome Powell reaffirmed the Central Bank’s commitment to fight inflation with restrictive monetary policy into the foreseeable future.

While markets initially rallied after the Federal Reserve’s announcement, heavy selling pressure took hold during Powell’s press conference.

The Dow Jones industrial average closed down 506 points, or 1.55%, the S&P 500 index closed down 2.51%, the Nasdaq Composite index closed down 3.36% and the Russell 2000 index closed down 2.99%.

While activity picked up late in the session, the market was quiet heading into the afternoon announcement with $250 million in reported volume prior to Powell’s press conference.

Earnings related volatility and topical trades remained the main driver for activity in the space.

Omnicell Inc. was the name of the day on Wednesday with its 0.25% convertible notes due 2025 tanking outright but expanding dollar-neutral with stock crushed following earnings.

Chegg Inc.’s convertible notes improved in active trading following an earnings beat.

And Bandwidth Inc.’s 0.25% convertible notes due 2026 jumped in active trading with the company announcing the repurchase of $160 million of the outstanding principal amount of the notes alongside earnings.

Omnicell’s results

Omnicell’s 0.25% convertible notes due 2025 were in focus on Wednesday with the notes tanking outright but expanding dollar-neutral with stock crushed post-earnings.

The notes fell 13 points outright with stock off about 34%.

The notes were changing hands at 87.5 versus a stock price of $55.08 early in the session, according to a market source.

The convertibles traded at 86.375 versus a stock price of $52.52 in the late afternoon.

The notes expanded about 1 point dollar-neutral on the move down, a source said.

There was $54 million in reported volume.

Omnicell’s stock traded to a high of $58.76 and a low of $48.95 before closing the day at $50, a decrease of 34.52%.

The health care technology company beat on the bottom line with earnings per share of $1 versus analyst expectations of 95 cents.

However, the company missed on the top line with revenue of $348 million versus the $363 million expected and downwardly revised its fourth-quarter guidance, which caused its stock to plummet.

Omnicell expects earnings per share of 5 cents to 15 cents in the fourth quarter, a significant reduction from previous guidance for EPS of 93 cents to $1.

Chegg’s earnings

Chegg’s convertible notes were making gains on an outright and dollar-neutral basis after an earnings beat.

The 0.125% convertible notes due 2025 jumped 4.5 points outright with stock up more than 20%.

The notes were trading at 91 versus a stock price of $26.84 in the late afternoon.

The notes gained 1 point dollar-neutral on the move, a source said.

There was $8 million in reported volume.

Chegg’s 0% convertible notes due 2026 climbed 1.5 points outright to 79.

They expanded 0.5 point dollar-neutral.

There was $7 million in reported volume.

Chegg’s stock traded to a high of $27.83 and a low of $25.10 before closing the day at $25.75, an increase of 21.98%.

Stock jumped after the education technology company posted a surprise earnings beat.

Chegg reported earnings per share of 21 cents versus analyst expectations for earnings of 14 cents.

Revenue was $164.74 million versus analyst expectations for revenue of $158.34 million.

Bandwidth’s buyback

Bandwidth’s 0.25% convertible notes due 2026 were active on the tape after the company announced privately negotiated buybacks of a portion of the outstanding amount.

The 0.25% convertible notes gained 7 points outright to trade up to 71.

They expanded about 4 points dollar-neutral, a source said.

There was $7 million in reported volume.

It was unclear whether the activity on the tape was the result of the company’s buyback trades or the explosion in stock post-earnings.

Bandwidth’s stock traded to a high of $18.90 and a low of $16.28 before closing the day at $17.42, an increase of 41.63%.

The communications company crushed analyst expectations with earnings per share of 27 cents versus expectations for 3 cents and revenue of $148.32 million versus expectations for revenue of $140.83 million.

In its earnings report, Bandwidth announced it entered into privately negotiated transactions to repurchase $160 million of the principal amount of the notes at a 29% discount to par, a source said.

Mentioned in this article:

Bandwidth Inc. Nasdaq: BAND

Chegg Inc. NYSE: CHGG

Omnicell Inc. Nasdaq: OMCL

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