Pebblebrook Hotel Trust convertibles fall on slashed guidance; Sarepta hits new heights

By Abigail W. Adams

Portland, Me., Dec. 21 – While equity markets continued to recover after the latest round of Fed-induced selling, activity in the convertibles secondary space continued to dwindle with many eager to close the books on 2022.

Equity indexes were boosted after a strong Consumer Confidence report with the Dow Jones industrial average closing Wednesday up 527 points, or 1.6%, the S&P 500 index closing up 1.49%, the Nasdaq Composite index closing up 1.54% and the Russell 2000 index closing up 1.47%.

There was $64 million in reported volume early in the session and $322 million on the tape about one hour before the market close.

Only one name logged more than $10 million in reported volume – Pebblebrook Hotel Trust.

Pebblebrook’s 1.75% convertible notes due 2026 sank in heavy volume after the REIT slashed fourth-quarter and year-end guidance.

While Pebblebrook saw large losses on Wednesday, it was a strong day for the market with several convertible notes lifted as equities recovered.

Sarepta Therapeutics Inc.’s 1.25% convertible notes due 2027 remained one of the year’s outperformers with the notes gaining outright on a strong day for its stock.

Axon Enterprise Inc.’s 0.5% convertible notes due 2027, one of the last deals to clear the primary market, also rose.

Pebblebrook falls

Pebblebrook’s 1.75% convertible notes due 2026 sank in heavy volume on Wednesday.

The notes fell 4.5 points outright with stock off more than 8%.

The notes were changing hands at 83.375 versus a stock price of $13.35 in the late afternoon, according to a market source.

The yield was about 6.5%.

There was $16 million in reported volume with the issue the most actively traded during Wednesday’s session.

Pebblebrook’s stock traded to a high of $13.91 and a low of $13.01 before closing the day at $13.20, a decrease of 8.52%.

Pebblebrook was under pressure after the company reduced its fourth-quarter guidance to earnings per share of 13 cents to 16 cents versus previous expectations for 18 cents to 24 cents per share.

The company is now expecting full-year earnings per share of $1.61 to $1.64 versus previous expectations for earnings per share of $1.66 to $1.72.

Sarepta gains

Sarepta’s 1.25% convertible notes due 2027 remained one of the best performing deals of 2022 with the notes adding to their outright gains on Wednesday.

The 1.25% notes climbed more than 2 points outright with stock up more than 4% in intraday activity.

The notes were changing hands at 115.5 versus a stock price of $130.09 early in the session.

They traded at 116.875 versus a stock price of $131.23 in the late afternoon, a source said.

It was the highest outright level for the notes since the $1.15 billion issue, which priced at par, hit the secondary space in mid-September.

There was $9 million in reported volume.

Sarepta’s stock traded to a low of $126.13 and a high of $133.14 before closing the day at $131.41, an increase of 3.12%.

While modest gains under normal market conditions, Sarepta’s 1.25% convertible notes were among the best performing new deals of 2022.

Axon adds

Axon’s 0.5% convertible notes due 2027 were on the rise on a strong day for the company’s equity.

The 0.5% convertible notes gained 1.5 points outright with stock up about 2%.

The notes were seen at 102.125 versus a stock price of $173.38 in the late afternoon.

There was $8 million in reported volume.

Axon’s stock traded to a high of $175.65 and a low of $171.86 before closing the day at $174.72, an increase of 1.95%.

Mentioned in this article:

Axon Enterprise Inc. Nasdaq: AXON

Pebblebrook Hotel Trust NYSE: PEB

Sarepta Therapeutics Inc. Nasdaq: SRPT

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