Western Digital active; AXA offering gets ‘positive reception’; Exact Sciences rebounds

By Abigail W. Adams

Portland, Me., April 27 – The convertibles space was relatively quiet on Friday with the new paper that priced during the week fading into the background and long-standing issuances returning to focus after reporting earnings.

Western Digital Corp.’s 1.5% convertible notes due 2024 were a major volume leader on Friday after the company reported third-quarter earnings after the market close on Thursday.

The notes were seen trading in a range of 105 to 108 as stock dropped more than 6%, despite an earnings beat. While a volume leader, only about $21 million of the bonds traded on Friday.

With the initial issuance $1 billion, the bonds are mostly put away, a market source said.

Exact Sciences Corp.’s long-struggling 1% convertible notes due 2025 made a comeback on Friday with the notes climbing about 5 points outright to trade above their issue price of 98.75 for the first time since early February.

Exact Sciences stock also soared on Friday after revenue from its flagship Cologuard product beat analyst expectations in the company’s first-quarter earnings report.

The market will not see AXA SA’s three-year bonds mandatorily exchangeable for AXA Equitable Holdings, Inc. until May 9. However, the deal looks good, a market source said.

Western Digital active

Western Digital’s 1.5% notes were once again a major volume leader in the convertibles space after the San Jose, Calif.-based computer data storage company reported third-quarter earnings after the market close on Thursday.

The notes were up slightly on an outright basis to trade north of 108 early in the session but dropped about 2 points to close Friday just north of 105, according to Trace data.

Western Digital stock wavered between a low of $80.60 and a high of $87.21 before closing Friday at $80.88, a decrease of 8%.

While stock was soft, Western Digital’s convertible bonds continued to perform well. “The bonds are very overvalued,” a market source said.

Although a volume leader, few bonds from the $1 billion issuance are available in the secondary market with the bonds well placed, the source said.

Western Digital stock saw nearly three times its average trading volume on Friday with 9.11 million shares traded versus the 50-day average of 3.57 million shares.

Western Digital reported third-quarter earnings after the market close on Thursday, which beat analyst expectations by a wide margin.

The company reported earnings per share of $3.63 on income of $1.1 billion. The consensus estimate was for earnings per share of $3.31.

While Western Digital stock surged in after-hours trading on Thursday, it dropped soon after the opening bell on Friday.

Exact Sciences’ comeback

Exact Sciences’ 1% convertible notes due 2025 made an enormous comeback on Friday after the Madison, Wis.-based molecular diagnostic company reported first-quarter earnings after the market close on Thursday.

The 1% notes traded in a range of 99 to par in high-volume trading on Friday. Exact Sciences’ stock traded to a low of $49.05 and a high of $53.68 before closing the day at $52.02, an increase of 11.63%.

The notes were up about 0.25 point dollar neutral, a market source said.

The 1% notes have struggled since experiencing a sell-off shortly after pricing in January, which was triggered by positive results in a clinical study from a Taiwan-based competitor.

The clinical study for a blood-based colorectal cancer screening test appeared to offer better results in a less obtrusive manner than Cologuard, a stool-based test that is Exact Sciences’ only product on the market.

Exact Sciences reported a net loss of $39.4 million, or 33 cents per share, for the first quarter, which beat analyst expectations of 37 cents per share.

Revenue jumped 87% to $90.3 million with testing volume also up 87%. Exact Sciences expects 220,000 to 230,000 completed Cologuard tests in the second quarter.

Friday marked the first day the notes have traded above their issue price since early February, according to Trace data.

AXA worth the wait

While it will be a week and a half before the secondary market sees AXA SA’s three-year bonds mandatorily exchangeable for AXA Equitable Holdings, the deal looks good, a market source said.

“At first blush, it’s a pretty positive reception,” a market source said. The deal has garnered interest from both hedge and outright accounts, the source said.

“People are excited to have another mandatory,” a market source said.

AXA plans to price $750 million three-year bonds mandatorily exchangeable for AXA Equitable Holdings stock on May 9 concurrently with an initial public offering of AXA Equitable stock.

Price talk is for a coupon of 6.75% to 7.25% and an initial exchange premium of 17.5% to 22.5%.

AXA SA will sell 137.25 million shares of common stock with the price expected to be between $24.00 and $27.00.

“The pricing on it is fine, and there may be a little IPO pop,” the source said.

If there is no dividend on the stock, the mandatory will look even better, another source said. “It’ll have the full pick up.”

Mentioned in this article:

Exact Sciences Corp. Nasdaq: EXAS

Western Digital Corp. Nasdaq: WDC

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