Spotify hits aftermarket, contracts on debut; Enphase under pressure; Halozyme active

By Abigail W. Adams

Portland, Me., Feb. 26 – The convertibles secondary space remained choppy on Friday with equities volatile following Thursday’s brutal sell-off, led by the tech sector.

The tech sector staged a rebound on Friday with the Nasdaq turning positive and closing the day up 0.56%.

However, the S&P 500 wavered between gains and losses before closing the day down 0.48% and the Dow Jones industrial average closed the day down another 469 points, or 1.5%.

New paper continued to struggle with Spotify Technology SA’s new exchangeable notes for Spotify USA Inc.’s shares trading down on an outright and dollar-neutral basis on their aftermarket debut.

Meanwhile, Enphase Energy Inc.’s two tranches of senior notes remained under pressure after a rough debut in the aftermarket on Thursday.

While both tranches continued to trade lower outright, the 0% convertible notes due 2026 were slightly improved dollar-neutral.

Halozyme Therapeutics Inc.’s 0.25% convertible notes due 2027 saw heavy volume. While the notes traded down outright, they were largely unchanged dollar-neutral.

Thursday’s sell-off in the tech sector offered a glimpse of what many sources have pointed to as a potential liability for the convertibles market – a pullback in equities that will pull the bottom out from the plethora of 0% convertible bonds that have priced in recent months.

However, investor demand for Spotify was strong, despite Thursday’s carnage, a source said.

Several deals remain in the pipeline and many of them are planning to come with low to no coupons and high premiums, a source said.

Spotify contracts

Spotify Technology priced $1.3 billion of five-year notes exchangeable for Spotify USA’s stock after the market close on Thursday at par with a coupon of 0% and an initial exchange premium of 70%.

Pricing came in line with talk for a fixed coupon of 0% and at the midpoint of talk for an initial exchange premium of 65% to 75%, according to a market source.

Investor demand for the notes remained strong, despite Thursday’s tape which saw the Nasdaq fall by 3.5%.

However, the new paper was struggling on its aftermarket debut.

Spotify’s 0% exchangeable notes due 2027 traded as low as 98.25 and as high as 100.375 early in the session.

The notes were changing hands at 99.5 with stock largely flat shortly before 11 a.m. ET.

The notes saw nominal improvement as the session progressed. They were changing hands between 99.75 and par about one hour before the market close.

The notes were contracted about 0.5 point dollar-neutral, a source said.

Spotify’s stock traded to a high of $311.83 and a low of $295.34 before closing the day at $307.38, an increase of 1.43%.

Enphase under pressure

Enphase Energy’s new convertible notes remained under pressure on Friday.

The 0% convertible notes due 2026 were changing hands between 97 and 97.5 early in the session.

They saw nominal improvement as the session progressed and were trading at 98 heading into the market close.

While the notes sank on an outright basis, they were firmer dollar-neutral with the notes up about 0.25 point, a source said.

The 0% convertible notes due 2028 traded as low as 95 and were changing hands around 96.25 early in the session.

They continued to trade on a 96-handle heading into the afternoon and were trading at 96.5 about one hour before the close.

Enphase’s stock was volatile early in the session and traded as low as $163.51 and as high as $173.45 within half an hour of the opening bell.

Stock traded to a low of $168 and a high of $177.40 before closing the day at $176.06, an increase of 5.19%.

The 0% convertible notes due 2026 traded as low as 98.75 and the 0% convertible notes due 2028 traded down to 97 on their aftermarket debut on Thursday.

Both tranches were contracted about 0.25 point dollar-neutral.

Halozyme active

Halozyme’s 0.25% convertible notes due 2027 remained active on Friday.

While the notes continued to trend lower outright, they were largely unchanged dollar-neutral.

The 0.25% notes were down about 1 point outright with stock off another 4%.

The notes were changing hands at 98.5 about one hour before the market close.

While down outright, the notes were unchanged to expanded 0.25 point dollar-neutral.

“I’m surprised how well they’ve held up given the stock move,” a source said.

Halozyme’s stock traded to a high of $48.63 and a low of $45.11 before closing the day at $45.25, a decrease of 4.35%.

Stock closed Thursday down 8.05%.

Mentioned in this article:

Enphase Energy Inc. Nasdaq: ENPH

Halozyme Therapeutics Inc. Nasdaq: HALO

Spotify USA Inc. NYSE: SPOT

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