Zendesk convertible notes in focus; SoFi, Snap active; Porch Group under pressure

By Abigail W. Adams

Portland, Me., April 19 – There was an uptick of activity in the convertibles secondary space on Tuesday on a strong day for equity markets.

Equity indexes saw a strong rebound on Tuesday despite a 10-year Treasury yield that topped 2.9% for the first time since 2018.

The Dow Jones industrial average closed the day up 500 points, or 1.45%, the S&P 500 index closed up 1.61%, the Nasdaq Composite index closed up 2.15% and the Russell 2000 index closed up 2.04%.

However, sources questioned whether the rally would last.

There was some underlying heaviness in the market as convertibles issuers begin to roll out earnings and the rout in Treasuries continued.

The 10-year Treasury yield settled at 2.944%.

There was $67 million in reported convertibles trading volume about one hour into the session and about $500 million on the tape shortly before the market close.

Zendesk Inc.’s 0.625% convertibles due 2025 were in focus and gaining on an outright and dollar-neutral basis following news the company was exploring a potential sale.

SoFi Technologies Inc.’s 0% convertible notes due 2026 were on the rise outright in active trading.

Snap Inc.’s 0.125% convertible notes due 2028 also saw some activity on Tuesday with the company scheduled to report earnings on Thursday.

Porch Group Inc.’s 0.75% convertible notes due 2026 were under pressure in active trading with the notes down more than 1.5 points dollar-neutral over the past two sessions.

Zendesk in focus

Zendesk’s 0.625% convertible notes due 2025 were making gains on an outright and dollar-neutral basis on Tuesday following news the company was exploring a potential sale.

The 0.625% convertible notes gained about 3.5 points outright with stock up about 6%.

The notes were changing hands at 132.375 versus a stock price of $127.92 early in the session.

They were trading just shy of 132.625 versus a stock price of $130.24 in the late afternoon.

The notes expanded 0.5 to 0.75 point dollar-neutral on the move, a source said.

There was $20 million in reported volume.

Zendesk’s stock traded to a low of $127.15 and a high of $130.83 before closing the day at $129.05, an increase of 6.05%.

Zendesk was in focus on news the company had hired advisers to explore a potential sale.

Zendesk has long been the center of takeover speculation with the company currently engaged in a proxy battle with activist investor Jana Partners, which has pushed for a sale of the company.

Zendesk’s convertible notes were active in early April after shareholder Light Street Capital founder Glen Kacher said in an interview the software company was an attractive target that may be worth $180 to $200 a share.

While the 0.625% notes were gaining on the stock move, market players were also positioning themselves in case there is a takeout, a source said.

Active issues

SoFi’s 0% convertible notes due 2026 and Snap’s 0.125% convertible notes due 2028 were active on a strong day for the companies’ stocks.

SoFi’s 0% convertible notes rose about 1 point outright with stock up almost 4%.

The notes were changing hands at 74 versus a stock price of $7.49 in the late afternoon.

There was $10 million in reported volume.

SoFi’s stock traded to a high of $7.58 and a low of $7.05 before closing the day at $7.41, an increase of 3.93%.

Snap’s 0.125% convertible notes due 2028 rose about 0.625 point with stock up 3%.

The notes were trading at 95.5 versus a stock price of $33.44 in the late afternoon, according to a market source.

There was $10 million in reported volume.

Snap’s stock traded to a high of $34.24 and a low of $32.32 before closing the day at $33.64, an increase of 3.06%.

The social media company is scheduled to report earnings on Thursday.

Snap priced a $1.5 billion issue of the 0.125% notes in February shortly after besting analyst expectations the previous quarter.

Snap’s stock saw extreme volatility surrounding its previous earnings report with stock down 25% leading into earnings only to jump 58% following a large earnings beat.

Analysts are expecting earnings of 1 cent per share on revenue of $1.07 billion when the social media company reports.

Porch under pressure

Porch Group’s 0.75% convertible notes due 2026 were under pressure in active trading with the notes down about 1.5 points dollar-neutral over the past two sessions.

The 0.75% notes were changing hands at 62.25 versus a stock price of $5.17 heading into the market close, according to a market source.

There was $9 million in reported volume.

Porch Group’s stock traded to a low of $5.02 and a high of $5.33 before closing the day at $5.20, an increase of 2.16%.

The notes were down about 1.5 points dollar-neutral on Monday, forcing people to mark their books down, a source said.

The notes trade on a heavy delta despite their low dollar price.

Mentioned in this article:

Snap Inc. NYSE: SNAP

SoFi Technologies Inc. Nasdaq: SOFI

Porch Group Inc. Nasdaq: PRCH

Zendesk Inc. NYSE: ZEN

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