MercadoLibre better; Momo brushes par; Illumina levels ‘baffling’; Exact Sciences eyed

By Abigail W. Adams

Portland, Me., Aug. 23 – While the trading frenzy surrounding the new paper to enter the convertibles secondary space died down on Thursday, MercadoLibre, Inc.’s new 2% convertible notes due 2028 and Cree, Inc.’s newly priced 0.875% notes due 2023 continued to see activity.

While the notes remained contracted dollar-neutral, MercadoLibre’s new 2% convertible notes were improved on both an outright and dollar-neutral basis.

Cree’s new 0.875% convertible notes continued to trade largely flat.

Exact Sciences Corp.’s 1% convertible notes due 2025 remained in focus with the notes continuing to see gains on an outright and dollar-neutral basis as stock broke out to a new 52-week high in intraday trading.

Illumina Inc.’s 0.5% convertible notes due 2021 were also active and recovering off their lows after the biotech firm priced its recent $650 million offering of 0% convertible notes due 2023.

Momo Inc.’s 1.25% convertible notes due 2025 also saw gains on an outright and dollar-neutral basis on Thursday with the notes flirting with par.

MercadoLibre rebounds

MercadoLibre’s new 2% convertible notes due 2028 remained the top volume mover in the secondary space on Thursday with the notes making gains on an outright and dollar-neutral basis, sources said.

The 2% notes were seen trading at 101.375 early in the session and 101.5 later in the afternoon.

The notes expanded about 0.5 point dollar-neutral on Thursday, a market source said. However, they remained contracted by about 1 point since hitting the market.

MercadoLibre stock closed Thursday at $348.27, an increase of 0.97%.

The 2% notes got “taken to the woodshed” on Wednesday with the notes trading as low as 98.5 out of the gate but gaining some steam to close the day around par, a market source said.

The notes were contracted 1 point to 2 points dollar-neutral on Wednesday.

“I’m guessing people didn’t want the EM risk,” a market source said. However, the Buenos Aires-based e-commerce company’s convertible bonds are dollar bonds converting into dollar American Depositary Receipts, the source said.

Proceeds from the convertible notes were used to repurchase or exchange $263.7 million principal amount of the company’s 2.25% convertible notes due 2019.

The size of the deal and the dynamics of the exchange may have impacted the new notes’ performance in the secondary space, another source said.

If holders of the old notes were offered a large amount of new notes, they most likely did not intend to hold that many bonds for very long.

“I think it priced correctly but not for the size. It was a big deal,” a market source said.

While Argentina is a fairly stable economy and may not carry the same risks as other Latin American countries, “there’s still some hair on it,” a market source said.

Cree flat

Cree’s newly priced 0.875% notes due 2023 were largely flat in the secondary space on Thursday, sources said.

The notes were trading at 100.4 with stock up slightly early in the session. They were hovering around par in the afternoon.

The notes were unchanged to expanded about 0.125 to 0.25 point dollar-neutral, sources said.

Cree stock closed Thursday at $46.02, an increase of 0.31%.

The 0.875% notes were largely flat on their market debut on Wednesday.

Exact Sciences in focus

Exact Sciences’ 1% convertible notes due 2025 remained in focus in the secondary space with the notes continuing to see gains on an outright and dollar-neutral basis.

The notes jumped another 8 points outright to trade at 118 early in the session with stock breaking out to a new 52-week high. The notes came in alongside stock into the afternoon with the notes at 114.

The 1% notes were up another 0.5 point dollar-neutral on Thursday, a market source said.

Exact Sciences stock closed Thursday at $67.99, an increase of 4.09%.

The 1% notes jumped more than 14 points outright and 2.5 points dollar-neutral on Wednesday as stock shot up more than 30%.

The huge move came after the molecular diagnostics company announced a sales and marketing agreement with Pfizer Inc. for its flagship product Cologuard.

Exact Sciences’ stock was heavily shorted by fundamental guys and there may now be short covering taking place, a market source said.

Illumina stays rich

Illumina’s outstanding 0.5% convertible notes due 2021 were rebounding off their lows after the biotech company’s new offering of 0% convertible notes due 2023 hit the market.

The 0.5% convertible notes were active in the secondary space on Thursday and were trading around 141.5, sources said.

They were seen up 1 point dollar-neutral after dropping 4 points dollar-neutral after the pricing of Illumina’s new 0% notes, a market source said.

The 0% notes due 2023 continued to trade at levels one source said was “baffling.”

The notes looked rich during pricing and traded rich in the secondary space, largely due to the demand for investment-grade paper and enchantment with the Illumina story, sources said.

The 0% notes have expanded about 5.5 points dollar-neutral since their secondary market debut on Aug. 17.

Illumina stock closed Thursday at $335.72, a decrease of 0.02%.

Momo gains steam

Momo’s struggling 1.25% convertible notes due 2025 were also making gains on an outright and dollar-neutral basis during Thursday’s session with the notes at times brushing against par.

The 1.25% notes traded as high as 99.75 on Thursday before falling back alongside stock. They were seen at 98.5 bid, 99 offered in the late afternoon.

The notes were up another 0.5 point dollar-neutral on Thursday after a 0.5 point dollar-neutral gain on Wednesday. Momo stock closed Thursday at $43.98, an increase of 0.05%.

The notes remain about 0.75 point contracted since hitting the market on June 27.

The 1.25% notes have been volatile since a short-seller report released on June 27 caused the notes and company stock to tank.

The 1.25% notes briefly traded above par in early July but have traded in the low 90s for most of August, according to Trace data.

Mentioned in this article:

Cree, Inc. Nasdaq: CREE

Exact Sciences Corp. Nasdaq: EXAS

Illumina Inc. Nasdaq: ILMN

MercadoLibre, Inc. Nasdaq: MELI

Momo Inc. Nasdaq: MOMO

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