Earnings-related surges lift Ford, Wolfspeed (Cree); Porch Group gains outright, contracts on hedge

By Abigail W. Adams

Portland, Me., Oct. 28 – The convertible secondary space continued to see an uptick of activity on Thursday as earnings and topical news triggered a surge in the equity of several issuers.

Ford Motor Co.’s 0% convertible notes due 2026 and Wolfspeed Inc.’s (formerly known as Cree Inc.) convertible notes saw heavy volume as stock surged following blowout earnings reports.

The notes were posting gains on an outright and dollar-neutral basis.

In topical news, Porch Group Inc.’s recently priced 0.75% convertible notes due 2026 made large gains on an outright basis but contracted dollar-neutral as stock also jumped double digits after the company announced an acquisition and guaranteed its stock would double within three years.

Ford’s earnings

Ford’s 0% convertible notes due 2026 was the top-traded issue of Thursday’s session with the notes notching a new outright high and posting gains dollar-neutral following the company’s earnings report.

The 0% notes traded as high as 120 as stock hit a new 52-week high early in the session.

They were changing hands at 117 in the afternoon as stock came in.

The notes expanded 0.5 point dollar-neutral.

Ford stock traded to a high of $17.58 and a low of $16.71 before closing the day at $16.86, an increase of 8.63%.

Ford reported earnings per share of 51 cents versus analyst expectations for earnings of 27 cents per share.

Revenue was $33.21 billion versus analyst expectations of $32.54 billion.

In addition, Ford reinstated its quarterly dividend.

The dividend of 10 cents per quarter is below the amount that was doled out before the dividend was suspended.

However, its reinstatement after more than one year helped propel Ford stock to a new 52-week high.

“It’s a bull day for Ford,” a source said.

Wolfspeed earnings

Wolfspeed (Cree) saw its already deep-in-the-money convertible notes rise further as earnings squashed expectations.

Wolfspeed’s 0.875% convertible notes due 2023 were changing hands at 194.875 versus a stock price of $113.42 early in the session.

The notes broke double par as stock continued its climb into the afternoon. They were changing hands at 203 heading into the market close.

The notes pushed out about 0.5 point dollar-neutral, a source said.

The 0.875% notes made large gains throughout the week in anticipation of a positive earnings report.

The notes closed out the previous week around 150, according to Trace data.

Wolfspeed stock traded to a low of $105.21 and a high of $125.37 before closing the day at $121.04, an increase of 33.2%.

Wolfspeed reported a loss per share of 21 cents versus analyst expectations for a loss per share of 24 cents.

Revenue was $156.6 million versus analyst expectations for revenue of $148.7 million.

Porch Group’s acquisition

Porch Group’s 0.75% convertible notes due 2026 made large gains on an outright basis but contracted dollar-neutral as stock rose double digits after the company announced an acquisition.

The 0.75% convertible notes hit their highest outright level since pricing.

They traded as high as 107 early in the session. They were changing hands around 106.75 heading into the market close.

While the notes rose almost 5 points outright, they contracted dollar-neutral.

The notes were in about 0.25 point on hedge.

“The delta was too heavy,” a source said. “They were overhedged maybe.”

Porch Group stock traded to a low of $18.10 and a high of $20.64 before closing the day at $19.82, an increase of 11.54%.

Stock surged after the Seattle-based software company serving home services professionals announced it was acquiring Floify, a software company serving mortgage companies, for $76.5 million in cash and $10 million in stock.

As part of the acquisition, Porch Group guaranteed Floify its stock would double by 2024 and offered to make up the difference if it did not.

Porch Group’s 0.75% convertible notes have struggled since the company priced the $425 million issue at par in September.

The notes traded as low as 95 as recently as Oct. 15.

However, they jumped as stock rebounded over the past two weeks.

Mentioned in this article:

Ford Motor Co. NYSE: F

Porch Group Inc. Nasdaq: PRCH

Wolfspeed Inc. NYSE: WOLF

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