Vertex on tap; Snap convertible notes in focus; Etsy, Cloudflare hit new heights

By Abigail W. Adams

Portland, Me., Oct. 25 – After three weeks of no new deal activity, the convertibles primary market reared its head with one small offering on deck.

Vertex Energy Inc. plans to price $155 million of six-year convertible notes after the market close on Tuesday at a discounted offer price of 90, a coupon of 6.25% to 6.75% and an initial conversion premium of 35% to 40%, according to a market source.

Oppenheimer & Co. Inc. is placement agent for the Section 4(a)(2) offering.

Meanwhile, it was another slow start to the week in the convertibles secondary space with trading volume light despite a strong day for equities with the S&P 500 index and Dow Jones industrial average again notching all-time highs

The Dow closed the day up 64 points, or 0.18%, the S&P 500 index closed up 0.47%, the Nasdaq Composite closed up 0.9% and the Russell 2000 index closed the day up 0.93%.

With several tech behemoths scheduled to report over the next few sessions, optimism surrounding earnings, in addition to renewed optimism over the infrastructure bill, which would include a provision to raise the debt ceiling, pushed up equity markets.

However, the strength in equities did little to spur activity in the secondary space, which has seen trading volume dwindle amid a lack of new paper.

There was $40 million in reported volume a little more than one-hour into Monday’s session and $300 million in reported volume less than one hour before the market close.

Snap Inc.’s convertible notes remained in focus after its earnings report cut its stock by more than 20% on Friday and dragged down the overall tech sector.

While the 0% convertible notes expanded on Friday, they gave back some of their dollar-neutral gains on Monday.

Etsy Inc.’s 0.25% convertible notes due 2028 were also among the major volume movers of Monday’s session as stock broke out to a new 52-week high.

While less active, Cloudflare Inc.’s 0% convertible notes due 2026 continued to gain on an outright basis with stock also hitting a new 52-week high.

Snap in focus

Snap’s convertible notes continued to dominate activity in the secondary space with the notes moving lower on an outright basis as downward momentum in the company’s stock continued.

Snap’s 0.75% convertible notes due 2026 were changing hands at 251.75 early in Monday’s session.

However, they dropped down to 246 heading into the market close.

There was about $12 million in reported volume.

Snap’s 0% convertible notes due 2027 were changing hands at 104.5 versus a stock price of $55.48.

They traded down to 103.5 in the late afternoon.

While the 0% notes expanded on Friday, they gave back some of their dollar-neutral gains during Monday’s session.

The notes contracted 0.25 to 0.5 point on swap, a source said.

There was about $13 million in reported volume.

Snap’s stock wavered between gains and losses early in the session before selling in the name resumed.

Snap’s stock traded to a high of $56.16 and a low of $53.77 before closing the day at $54.50, a decrease of 1.16%.

New heights

While trading volume remained light on Monday, the equities of several convertibles issuers broached fresh heights alongside the broader markets.

Etsy and Cloudflare were among the names to notch new 52-week highs on Monday, which lifted their convertible notes on an outright basis.

Etsy’s 0.25% convertible notes due 2028 rose 2.5 points outright with stock up more than 4.5%.

The notes were changing hands at 126.75 versus a stock price of $250.38 in the late afternoon.

There was more than $10 million in reported volume.

Etsy’s stock traded to a low of $243.50 and a new 52-week high of $253.05 before closing the day at $252.57, an increase of 4.68%.

Etsy is scheduled to report earnings on Nov. 3.

Cloudflare’s 0% convertible notes due 2026 were up 3.5 points outright with stock up almost 5% in intraday activity.

The 0% convertible notes were changing hands at 125 versus an equity price of $190.5 in the late afternoon.

There was about $6 million in reported volume.

Cloudflare’s stock traded to a low of $179.73 and a new 52-week high of $192.08 before closing the day at $189.41, an increase of 4.42%.

The cyber-security company’s stock has gained more than 50% over the past month as investors pile into the sector.

Cybersecurity has become a pressing policy issue for Washington as ransom ware attacks rise.

Mentioned in this article:

Cloudflare Inc. NYSE: NET

Etsy Inc. Nasdaq: ETSY

Snap Inc. NYSE: SNAP

Vertex Energy Inc. Nasdaq: VTNR

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