Ford, Etsy convertible notes gain post-earnings; Enphase’s upward momentum continues

By Abigail W. Adams

Portland, Me., July 28 – The convertibles primary market remained dormant on Thursday as the market continued to digest a slew of economic data, earnings reports and the Federal Reserve’s 75 basis point rate increase.

With no deals announced on Thursday, July is set to be a paperless month for the convertibles market.

While typically a slow month for dealmaking, July 2022 marks the first July since the Prospect News began keeping records in 2001 that a deal has not priced.

However, with markets extending their rally, earnings blackouts coming to an end and money to be put to work in the market, sources were hopeful the primary market would resume activity soon.

Equity markets were again volatile with selling in the morning turning into buying and equity indexes extending their post-Fed rally.

The Dow Jones industrial average closed Thursday up 332 points, or 1.03%, the S&P 500 index closed up 1.21%, the Nasdaq Composite index closed up 1.08%, and the Russell 2000 index closed up 1.34%.

While a surprise contraction of the U.S. GDP in the second quarter initially sparked selling activity, the economic figure also lowered the outlook for the Federal Reserve’s rate increase.

With equities volatile, activity in the convertibles secondary space remained thin with $88 million on the tape about one hour into the session and $334 million in reported volume about one hour before the market close.

Earnings-related volatility remained a main driver of trading activity in the space.

Ford Motor Co.’s 0% convertible notes due 2026 were in focus with the notes making strong gains on an outright and dollar-neutral basis post-earnings.

Etsy Inc.’s convertible notes were also active with the notes up outright although largely unchanged dollar-neutral.

Enphase Energy Inc.’s 0% convertible notes due 2026 continued their upward momentum in active trading following strong earnings.

Ford in focus

Ford’s 0% convertible notes due 2026 dominated the tape on Thursday with the notes making strong gains on an outright and dollar-neutral basis following earnings.

The 0% convertible notes gained 4 points outright with stock up about 6%.

The notes were changing hands at 103.5 early in the session. They continued to climb as the session progressed and stood poised to close the day just shy of 104.25.

The notes expanded 0.5 point to 0.75 point dollar-neutral on the move up, a source said.

Ford’s stock traded to a high of $14.09 and a low of $13.38 before closing the day at $14, an increase of 6.14%.

The company reported a surprise earnings beat with earnings per share of 68 cents versus analyst expectations for earnings of 43 cents.

Revenue was $37.91 billion versus analyst expectations for revenue of $35.17 billion.

Ford also announced that layoffs were coming.

Etsy’s earnings

Etsy’s convertible notes were active and making outright gains as stock surged following an earnings beat.

However, the high-premium notes were largely moving in line dollar-neutral, a source said.

Etsy’s 0.25% convertible notes due 2028 rose 3 points outright with stock up almost 10%.

The notes were seen at 80.75 versus a stock price of $104.67 in the late afternoon.

There was $17 million in reported volume.

Etsy’s 0.125% convertible notes due 2027 gained 2.125 points outright.

The notes were changing hands at 89.25 versus a stock price of $104.75 in the late afternoon.

The notes were moving in line dollar-neutral, a source said.

There was about $7 million in reported volume.

However, modeling the notes was difficult with the volatility of stock pushing past the 45% vol. cap typically placed on convertible notes.

Etsy’s stock traded to a low of $100.30 and a high of $106.66 before closing the day at $104.92, an increase of 9.86%.

Stock surged with the e-commerce company for vintage and handmade items posting a surprise earnings beat.

Etsy reported earnings per share of 94 cents versus analyst expectations for earnings of 74 cents. Revenue was $585.14 million versus the $556.85 million expected.

Enphase gains continue

Enphase’s 0% convertible notes due 2026 continued their upward momentum in active trading on Thursday after posting strong gains the previous session.

The 0% convertible notes rose another 3 points outright with stock up 7%.

They were changing hands at 116.125 versus a stock price of $267.93 in the late afternoon.

The notes expanded 2.5 to 3 points dollar-neutral on the move up, a source said.

Enphase’s stock traded to a high of $285 and a low of $263.50 before closing the day at $274.18, an increase of 7.62%.

In addition to strong earnings announced post-close on Tuesday, solar companies were given an extra boost on news that the Democrats’ energy and health care bill again had a fighting chance of passage after moderate senator Joe Manchin reached a surprise agreement with party leadership.

Mentioned in this article:

Enphase Energy Inc. Nasdaq: ENPH

Etsy Inc. Nasdaq: ETSY

Ford Motor Co. NYSE: F

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