Workday convertibles down outright, up on hedge; Zscaler gains outright, weaker on hedge

By Abigail W. Adams

Portland, Me., May 27 – It was a quiet day in the convertibles secondary space on Friday with bond markets in the United States closing early ahead of the Memorial Day weekend.

While quiet, the market remained strong with the lift-a-thon continuing as equity indexes notched another day of strong gains.

The Dow Jones industrial average closed Friday up 576 points, or 1.76%, the S&P 500 index closed up 2.47%, the Nasdaq Composite index closed up 3.33% and the Russell 2000 index closed up 2.7%.

There was about $90 million in reported convertibles trading volume a little more than one hour into the session and $324 million on the tape about one hour before the market close.

Workday Inc.’s 0.25% convertible notes due Oct. 22, 2022 were in focus with the notes down outright but up on hedge as stock tanked following earnings.

Zscaler Inc.’s 0.125% convertible notes due 2025 also saw heavy volume post-earnings.

While the notes made large gains on an outright basis, they were coming in on swap.

Several badly battered convertible notes continued to notch outright gains as equities surged from lows and credit spreads tightened.

Confluent Inc.’s 0% convertible notes due 2027 and SoFi Technologies Inc.’s 0% convertible notes due 2026 were among the high-premium notes to rise outright during Friday’s session.

Workday’s earnings

Workday’s 0.25% convertible notes due Oct. 22, 2022 were in focus on Friday with the notes down outright but up on hedge as stock tanked post-earnings.

The 0.25% convertible notes were down about 4 points outright with stock off more than 5%.

The notes were changing hands at 110.875 early in the session.

They pared their outright losses alongside stock as the session progressed and were trading at 113 versus a stock price of $157.14.

They gained about 1.5 points on swap, a source said.

There was $23 million in reported volume.

Workday’s stock traded to a low of $149.06 and a high of $159.96 before closing the day at $158.79, a decrease of 5.5%.

Stock fell after the software company reported mixed earnings.

Workday reported earnings per share of 83 cents versus analyst expectations for earnings of 85 cents.

Revenue of $1.43 billion was in line with expectations.

Zscaler’s earnings

Zscaler’s 0.125% convertible notes due 2025 were active as stock surged following earnings.

The 0.125% notes rose 8 points outright with stock up more than 12%.

They were changing hands at 126.375 versus a stock price of $156.84 heading into the market close.

While the notes rose outright, they were weaker on swap, a source said.

Zscaler’s stock traded to a high of $162.64 and a low of $150.22 before ending the day at $160, an increase of 12.57%.

The cloud security company’s stock surged after a strong earnings report.

Zscaler reported earnings per share of 17 cents versus analyst expectations for earnings per share of 11 cents.

Revenue was $286.81 million versus analyst expectations for revenue of $271.48 million.

Lifted

Several badly battered convertible notes were rising as equities continued to bounce off recent lows.

Confluent’s 0% convertible notes due 2027 gained 1.75 points outright with stock up 8%.

The notes were changing hands at 73.75 versus a stock price of $20.97 in the late afternoon.

The yield on the notes was 6.695%.

There was $10 million in reported volume.

Confluent’s stock traded to a low of $19.87 and a high of $21.39 before closing at $21.36, an increase of 8.21%.

SoFi’s 0% convertible notes due 2026 rose 1.375 points outright.

The notes were seen just shy of 70 with a yield of 8.5%.

SoFI’s stock traded to a high of $7.68 and a low of $7.19 and finished at $7.55, an increase of 5.74%.

Mentioned in this article:

Confluent Inc. Nasdaq: CFLT

SoFi Technologies Inc. Nasdaq: SOFI

Workday Inc. Nasdaq: WDAY

Zscaler Inc. Nasdaq: ZS

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