Stride convertible notes soar; NextGen gains; Palo Alto Networks, Wolfspeed active

By Abigail W. Adams

Portland, Me., Jan. 25 – The domestic convertibles primary market remained dormant on Wednesday with the window of opportunity for new issuance in January coming to a close.

Deals are in the works and the floodgates are expected to open, sources said.

However, expectations for activity before the end of the week were low.

Meanwhile, activity in the convertibles secondary space was steady on a volatile day for equities.

After a round of heavy selling early in the session, indexes erased their losses to end the day mixed.

The Dow Jones industrial average closed Wednesday up 10 points, or 0.03%, the S&P 500 index closed down 0.02%, the Nasdaq Composite index closed down 0.18% and the Russell 2000 index closed up 0.25%.

There was $50 million on the tape about one hour into the session and $418 million in reported volume about one hour before the market close.

While disappointing earnings from Microsoft dragged down equity markets early in the session, positive earnings surprises lifted some convertible notes.

Stride Inc.’s (formerly K-12 Inc.) 1.125% convertible notes due 2027 skyrocketed outright and made strong dollar-neutral gains following earnings.

NextGen Healthcare Inc.’s 3.75% convertible notes due 2027 also improved on an outright and dollar-neutral basis following earnings.

Palo Alto Networks Inc.’s 0.375% convertible notes due 2025 continued to see heavy volume after dominating activity the previous session.

Wolfspeed Inc.’s convertible notes were also active with holders switching from the old issue to the new.

Stride soars

Stride’s 1.125% convertible notes due 2027 skyrocketed outright and made strong gains dollar-neutral as stock popped more than 25% following earnings.

The 1.125% convertible notes gained 11 points outright with stock up more than 25%.

The notes shot above par and were seen at 103.5 versus a stock price of $41.28 early in the session.

They were changing hands at 102 versus a stock price of $40.48 in the late afternoon.

The notes expanded 1.5 to 2 points dollar-neutral, a source said.

There was $17 million in reported volume.

Stride’s stock traded to a low of $38.61 and a high of $41.95 before closing the day at $40.86, an increase of 27.69%.

Stock skyrocketed after the for-profit education company posted a large earnings beat and strong guidance.

Stride reported earnings per share of $1.19 versus analyst expectations for earnings of $1.05.

Revenue was $458.4 million versus analyst expectations for revenue of $443.2 million.

Guidance also surpassed expectations with the company upping its 2023 revenue forecast to $1.78 billion to $1.82 billion from the previous $1.71 billion to $1.79 billion.

NextGen improves

NextGen’s 3.75% convertible notes due 2027 were on the rise in heavy volume with the market responding favorably to earnings, despite a slight miss.

The 3.75% notes gained 2.5 to 3 points outright with stock up more than 5%.

The convertibles were seen at 102.75 versus a stock price of $18.17 in the late afternoon.

The notes gained 0.5 to 0.75 point dollar-neutral.

NextGen’s stock traded to a low of $16.51 and a high of $18.53 before closing the day at $18.07, an increase of 5.8%.

The health records software company’s capital structure was lifted despite a slight earnings miss.

NextGen reported earnings per share of 26 cents versus analyst expectations for earnings of 27 cents.

Revenue was $161.88 million versus analyst expectations for revenue of $161.96 million.

Palo Alto active

Palo Alto’s 0.375% convertible notes due 2025 remained the top traded issue in the secondary space for the second consecutive session.

The 0.375% notes gave back some gains from the previous session with the notes lower outright with stock in the red for most of the session.

The notes were wrapped around 156 in the late afternoon.

While Palo Alto’s stock was in the red and traded down to a low of $146.95, it fought its way back to positive territory and traded as high as $152.19 before closing at $151.78, an increase of 0.42%.

The 0.375% notes saw heavy volume on Tuesday on a positive analyst report.

Wolfspeed active

Wolfspeed’s convertible notes were also active on Wednesday with holders switching from the old issue to the new.

The 1.875% convertible notes due 2029 fell below par in early trading after hitting their highest outright level the previous session since pricing.

The 1.875% notes were off about 2.5 points outright to trade down to 99.25.

However, the notes recovered alongside stock and were changing hands at 100.625 versus a stock price of $81.66 in the late afternoon.

There was $8 million in reported volume.

The 1.875% notes traded up to 102 on Tuesday, their highest outright level since the $1.75 billion issue priced on Nov. 16.

Wolfspeed’s 0.25% convertible notes due 2028 were down 1 point outright.

The notes were trading at 93.5 versus a stock price of $79.71 in the late afternoon.

There was $5 million in reported volume.

Wolfspeed’s stock traded to a low of $78.10 and a high of $82.59 before closing the day at $81.96, an increase of 0.43%.

Mentioned in this article:

NextGen Healthcare Inc. Nasdaq: NXGN

Palo Alto Networks Inc. Nasdaq: PANW

Stride Inc. NYSE: LRN

Wolfspeed Inc. NYSE: WOLF

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