Morning Commentary: Exact Sciences convertibles eyed; K12 notes gain post earnings

By Abigail W. Adams

Portland, Me., Oct. 27 – The convertibles secondary space was again quiet early Tuesday as equity markets struggled to find direction.

There was $55 million in reported volume about one hour into the session.

With no new deals launched and the primary market calendar expected to be light throughout the week, attention was on earnings with a slew of reports from convertible issuers expected over the course of the week.

K12 Inc.’s 1.125% convertible notes due 2027 jumped alongside stock early in the session following a better-than-expected earnings report.

Exact Sciences Corp.’s convertible notes were in focus early in the session with the notes gaining alongside stock following its earnings report, an acquisition announcement and a secondary offering.

K12’s earnings in focus

K12’s 1.125% convertible notes due 2027 were on the rise as stock jumped following a better-than-expected earnings report.

The 1.125% notes gained more than 3 points to trade up to 91.75 early in the session.

The bonds saw $4 million in reported volume.

K12’s stock traded up to $30.05, an increase of 6.41%, shortly before 11 a.m. ET.

The education technology company announced earnings per share of 30 cents versus analyst expectations for a loss per share of 31 cents.

Revenue was $370 million versus analyst expectations for revenue of $362 million, MarketWatch reported.

Exact Sciences up

Exact Sciences’ convertible notes were in focus and jumped alongside stock in early trading on Tuesday after the company announced an acquisition and a secondary offering.

The 0.375% convertible notes due 2027 were up 11 points outright with stock up 18%.

The notes were changing hands at 132.5 with more than $6 million in reported volume, a source said.

Exact Sciences’ 0.375% convertible notes due 2028 also jumped 11 points outright.

The notes were trading at 123.5 early in the session.

Exact Sciences’ stock traded as high as 128.04 early in the session and was changing hands at $125.74, an increase of 17.98%, shortly before 11 a.m. ET.

Stock soared after the molecular diagnostic company announced an earnings beat and that it was acquiring cancer detection company Thrive Early Detection for $2.15 billion in cash and stock.

The company also recently acquired Base Genomics Ltd. for $410 million in cash.

Exact Sciences also announced that it was pricing a secondary offering of 8.6 million shares for gross proceeds of $869.2 million, according to a 424B2 filing with the Securities and Exchange Commission.

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