Secondary better to buy; Five9 convertibles expand as stock tanks; Expedia active

By Abigail W. Adams

Portland, Me., Aug. 31 – Activity in the secondary space remained muted on Tuesday on a choppy day for equities with benchmarks wavering between gains and losses before closing the day mixed.

After flirting with positive territory, the Dow Jones industrial average closed the day down 39 points, or 0.11%, the Nasdaq Composite closed down 0.04%, and the S&P 500 index closed down 0.13%.

However, the Russell 2000 index was positive and closed the day up 0.33%.

While volume remained light with no new paper entering the space since Aug. 18, the market was better to buy as accounts picked through outstanding issues to put money to work on the last day of the month, a source said.

Five9 Inc.’s 0.5% convertible notes due 2025 were in focus with the notes tanking outright but expanding on a dollar-neutral, or hedged, basis as stock sold off alongside Zoom Video Communications Inc.’s stock.

Expedia Inc.’s 0% convertible notes due 2026 (Baa3/BBB-/BBB-) were active although with little movement in price.

Five9 expands

Five9’s 0.5% convertible notes due 2025 were in focus on Tuesday with the notes dropping outright but seeing a large dollar-neutral expansion as stock tanked.

The 0.5% convertible notes fell about 14 points outright.

The notes were changing hands at 136.375 early in the session. The notes continued to trend lower as the session progressed and were trading at 135.5 heading into the market close.

The notes expanded 3 points dollar-neutral on the move down, a source said.

Five9’s stock traded to a high of $159.81 and a low of $155.06 before closing the day at $158.23, a decrease of 14.39%.

Stock nosedived as Zoom Video’s stock also tanked more than 16% following earnings.

Zoom’s stock closed Tuesday at $289.50, a decrease of 16.69%.

The communications technology company reported earnings per share of $1.36 versus analyst expectations for earnings per share of $1.16.

Revenue was $1.02 billion versus analyst expectations for revenue of $991 million.

While Zoom beat expectations, stock tanked as the company warned of slowing growth.

In July, Zoom announced it planned to acquire Five9 in an all-stock transaction with Five9 shareholders receiving 0.5533 of a share of Zoom stock for each Five9 share.

The announcement boosted Five9’s stock and convertible notes with Zoom a better credit and a higher vol. stock than Five9.

The deal is expected to close in the first half of 2022.

While the acquisition will prompt a revaluation of Five9’s convertible notes, the market also needs to factor in the potential of the deal falling apart, a source said.

Expedia active

Expedia’s 0% convertible notes due 2026 were active on Tuesday although with little movement in price.

The 0% notes were changing hands at 104.5 versus a stock price of $144.54 early in the session, according to a market source.

They continued to trade on a 104-handle heading into the afternoon.

Expedia’s stock traded to a high of $145.46 and a low of $143.16 before closing the day at $144.50, an increase of 0.21%.

The notes are investment grade and sought after by certain buyers, a source said.

Mentioned in this article:

Expedia Inc. Nasdaq: EXPE

Five9 Inc. Nasdaq: FIVN

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