By Rebecca Melvin
New York, May 6 - U.S. convertibles were little changed on Tuesday as earnings drove the lion's share of trading activity. Convertibles moved mostly in tandem with their underlying shares, market players said.
Fluidigm Corp.'s 2.75% convertibles due 2034 traded actively and fell in line with their underlying shares, which skidded 16% after the genomics and DNA research company reported better-than-expected earnings but warned that revenue will be softer than expected from its product line associated with the DVS Sciences Inc. acquisition.
Prospect Capital Corp.'s 5.75% convertibles due 2018 traded actively ahead of the New York-based venture capital and private equity firm's earnings report, which was released after the market close.
The Prospect Capital bonds printed at 107.125 in the early going, according to Trace data, with shares off only a few cents at $10.78.
The newest Prospect Capital convertible, a 4.75% convertible due 2020 that was a $400 million issue, priced in April at a 99 discount to par and was not heard in trade.
Starwood Property Trust Inc.'s 4% convertible due 2019 traded at 115.4, which was down almost 0.5 point on an outright basis versus a 0.2% drop in the underlying shares of the Greenwich, Conn.-based mortgage loan investor.
Elsewhere, there was outright interest in the planned American Tower Corp. mandatory deal that was seen pricing after the market close at fixed talk of a 5.25% dividend and a 25% initial conversion premium.
The $425 million of series A mandatory convertible preferred stock was seen attracting a lot of interest mainly due to the fact that there hasn't been an abundance of new issuance lately, but also because of its business as a communications tower site developer.
Also on the new deal calendar is Iridium Communications Inc.'s $125 million offering of cumulative perpetual convertible preferreds set to price Thursday and on the horizon an offering of mandatories that Exelon Corp. will bring to help fund its acquisition of Pepco Holding Inc.
The trend toward quiet and boring remained in effect, traders said, and the market was flat on a dollar-neutral, or hedged, basis, as equities sank amid mixed earnings and growing uncertainty regarding China's economy and the geopolitical situation in the Crimea.
The tech-heavy Nasdaq stock market slid 57.30 points, or 1.4%, to 4,080.76, while the Dow Jones industrial average fell 129.53 points, or 0.8%, to 16,401.02 and the S&P 500 stock index ended down 16.94 points, or 0.9%, to 1,867.72.
Fluidigm holds in on hedge
Fluidigm's 2.75% convertibles due 2034 traded down on an outright basis to about 102.5 at the end of Tuesday from 108.25 at the end of Monday.
But shares dropped 16%; so, on a dollar-neutral basis, a 102 bid, 102.75 offered market versus the underlying share price of $33.05 was on par with 108.25 versus $37.95 share price on Monday, market sources said.
"I was most active in Fluidigm. It held up well, trading essentially flat dollar neutral," a New York-based trader said.
The lower bond price was in line with shares on a 62% delta. But market players on a 68% delta saw the bonds expand 0.25 point, a New York-based trader said of pricing early Tuesday when the stock was down 7% and the bond was seen at 106.25.
Fluidigm said its proteomics business, which is associated with its recent acquisition of DVS, will be softer than expected for full-year 2014 due to "an unexpected product placement issue via their platform," a New York-based trader said.
As a result, the company reduced guidance on that sector of the business by $6 million, the trader said.
Gajus Worthington, Fluidigm president and chief executive, said in a news release that the company expects its CyTOF system "remains uniquely capable of satisfying" large and unmet need for single-cell protein expression in the single-cell biology market.
"We are confident this business will deliver growth in the medium and long term; however, we now anticipate 2014 revenue from this product line will be softer than our previous expectations," Worthington said in the release.
For its first quarter, the company beat earnings and revenue estimates.
An outright buyer was in the market for these bonds on Friday and Monday before the drop and when the bonds traded up to 108.
Mentioned in this article:
American Tower Corp. NYSE: AMT
| Exelon Corp: | NYSE: EXC
|
| Fluidigm Corp. | Nasdaq: FLDM
|
| Iridium Communications Inc. | Nasdaq: IRDM
|
| Prospect Capital Corp. | Nasdaq: PSEC
|
| Starwood Property Trust Inc. | Nasdaq: STWD
|
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