Snap convertible notes under pressure after earnings released; Ford, Enphase improve

By Abigail W. Adams

Portland, Me., Feb. 7 – The convertibles primary market remained dormant on Wednesday with the market poised for a paperless week absent an overnight offering on Thursday.

It was also a relatively quiet day in the secondary space as market players awaited a reactivation of the primary market.

Equity indexes were mixed with Treasuries largely flat as markets continue to reassess the rate environment.

The Dow Jones industrial average closed Wednesday up 156 points, or 0.40%, the S&P 500 index closed up 0.82%, the Nasdaq Composite index closed up 0.95% and the Russell 2000 index closed down 0.17%.

There was $52 million in reported convertible bond trading volume about one hour into the session and $656 million on the tape at market close.

While trading volume remained driven by investment-grade issues, earnings-related news sparked some large price movements in the space.

Snap Inc.’s convertible notes were in focus with the notes under pressure as stock plunged after an earnings disappointment.

However, Ford Motor Co.’s 0% convertible notes due 2026 (Ba2/BB+) and Enphase Energy Inc.’s convertible notes improved after better-than-expected earnings.

Snap under pressure

Snap’s convertible notes were under pressure in active trade on Wednesday as stock plunged following disappointing earnings.

Snap’s balanced 0.75% convertible notes due 2026 dropped 14 points outright with stock off more than 30%.

The notes were changing hands at 96.25 versus a stock price of $11.93 early in the session, according to a market source. They sank to 94.5 heading into the market close.

The notes contracted about 0.5 point on hedge on the move down, a source said.

There was $13 million in reported volume.

The 0.25% convertible notes due 2025 fell 9 points outright.

Those notes were seen at 97.75 versus a stock price of $12.13 early in the session. They were trading at 97.5 heading into the close.

The notes contracted about 0.25 point dollar-neutral.

There was $4 million in reported volume.

Snap’s 0.125% convertible notes due 2028 fell 4 points outright.

The notes were trading at 76.875 versus a stock price of $12 early in the session and fell to 75.375 heading into the market close, sources said.

The 0.125% convertible notes due 2028 contracted 1.5 points dollar-neutral on the move down.

There was $14 million in reported volume.

The 0% convertible notes due 2027 were off about 1 point outright to trade at 79.75 with the yield about 7.125%.

They contracted about 0.5 point dollar-neutral.

There was $16 million in reported volume.

Snap’s stock plunged following earnings, trading to a low of $11.08 and a high of $12.39 before closing at $11.41, a decrease of 34.65%.

Snap reported mixed earnings with earnings per share of 8 cents versus the 6 cents expected but revenue of $1.36 billion versus the $1.38 billion expected.

The camera and social media company also issued weak guidance.

Ford improves

Ford’s 0% convertible notes due 2026 improved in active trade after an earnings beat and dividend boost.

The 0% convertible notes jumped 2.5 points outright with stock up about 6%.

The notes were trading at 101 versus a stock price of $12.82 heading into the market close.

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

There was $16 million in reported volume.

Ford’s stock traded to a low of $12.20 and a high of $12.98 before closing at $12.80, up 6.05%.

Stock jumped after the automaker reported a large earnings beat and strong guidance and upped its dividend to shareholders.

Ford reported earnings per share of 29 cents versus the 14 cents expected. Revenue was $43.2 billion versus the $40.12 billion expected.

The company also announced a special dividend of 18 cents in addition to the regular first-quarter dividend of 15 cents.

Enphase’s earnings

Enphase Energy’s convertible notes improved on Wednesday after the solar energy company reported earnings.

The 0% convertible notes due 2026 jumped 3 points outright with stock up about 16%.

They were trading at 90.875 heading into the market close.

The notes gained about 0.5 point on hedge on the move up, a source said.

There was $10 million in reported volume.

Enphase’s 0% convertible notes due 2025 added about 4 points outright.

The notes were wrapped around 87 heading into the market close although volume in the tranche was light.

While up outright, the notes were largely unchanged dollar-neutral, a source said.

Enphase’s stock traded to a low of $114.70 and a high of $124.10 before closing at 117.51, an increase of 16.91%.

Stock jumped despite Enphase reporting an earnings miss and weak guidance.

Enphase reported earnings per share of 54 cents versus analyst expectations for earnings of 55 cents.

Revenue was $303 million versus analyst expectations for revenue of $328 million.

While first-quarter guidance of $260 million to $300 million was below estimates of $318 million, the company’s CEO also called a bottom to the struggles of the solar industry in the first quarter with demand expected to improve alongside rate cuts.

Market expectations were low heading into Enphase’s earnings report with the solar sector under pressure from weak numbers across the industry.

Mentioned in this article:

Enphase Energy Inc. Nasdaq: ENPH

Ford Motor Co. NYSE: F

Snap Inc. NYSE: SNAP

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