Illumina in focus as stock plunges; Western Digital improves; Caesars active

By Abigail W. Adams

Portland, Me., July 12 – The convertibles secondary space saw an uptick of activity on Friday.

However, volume was concentrated on primarily one name – Illumina Inc.

Illumina’s convertible notes were trading down with outright accounts selling as its stock plummeted after the genetic analysis company cut its revenue forecast and received a ratings downgrade.

Western Digital Corp.’s 1.5% convertible notes due 2024 were also major volume movers during Friday’s session with the notes improving as activist investors took positions in the company.

Caesars Entertainment Corp.’s 5% convertible notes due 2024 were also active as Eldorado Resorts works to secure funding for its buyout of the gaming corporation.

While trading activity was subdued outside of a few names, paper with large yields seemed to be in demand with any convertible note that offered more than a 3% yield catching a bid, a market source said.

Illumina in focus

Illumina was the name of the day with the genetic analysis company’s 0% convertible notes due 2023 and 0.5% convertible notes due 2021 in focus as stock got crushed.

The 0% convertible notes due 2023 were the most actively traded issue in the secondary space, sources said.

The notes dropped about 10 points outright to change hands at 109, according to a market source.

While the notes were coming in, they were still trading rich with 41 points of premium, a market source said.

The notes are heavily shorted, a source said.

Illumina’s 0.5% convertible notes due 2021 were down about 19 points outright. They were changing hands at 135.375.

The 0.5% notes saw more than $24 million in reported volume during Friday’s session.

They were previously trading in the 152 to 154 range, a market source said.

Illumina stock plummeted on Friday and closed the day at $305.05, a decrease of 16.12%.

Stock was down after Illumina reduced full year guidance and announced second-quarter revenue would be approximately $835 million, which was well below analyst expectations for revenue of $887.9 million.

In addition to reducing their guidance, BofA Merrill Lynch reduced their price target for Illumina to $290 from $355.

Western Digital improves

Western Digital’s 1.5% convertible notes due 2024 were improved on Friday with stock gains spurring activity in the notes.

The 1.5% notes were changing hands at 92 bid, 92.5 offered. The notes were largely trading for the yield, a source said.

Western Digital stock was on the rise after activist investors were reported to have taken positions in the company, a source said.

Stock closed Friday at $55.30, an increase of 1.92%.

Caesars Entertainment active

Caesars Entertainment’s 5% convertible notes due 2024 saw a fresh round of activity on Friday.

The notes were changing hands around 171.75 with stock largely flat.

Caesars stock closed Friday at $11.84, 0.08%.

The notes have been active in the secondary space since Eldorado formerly announced its highly anticipated buyout of the gaming corporation in a $17.3 billion cash-and-stock deal, which includes debt.

Eldorado will pay $8.40 in cash and 0.0899 of a share in Eldorado common stock for each share of Caesars.

Eldorado moved forward with securing financing for the deal with its Thursday announcement that it would sell two of its casinos in Missouri and Mississippi for $230 million with proceeds to go towards the acquisition of Caesars, according to a company news release.

Mentioned in this article:

Caesars Entertainment Corp.

Nasdaq: CZR

Illumina Inc.

Nasdaq: ILMN

Western Digital Corp.

Nasdaq: WDC

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