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Morning Commentary: Zynga convertible notes in focus on buyout; equity indexes sink
By Abigail W. Adams
Portland, Me., Jan. 10 – The convertibles secondary space saw a quiet start to the week as the rout in Treasuries continued to rattle markets.
High-flying tech sectors continued to lead losses.
The Dow Jones industrial average was down 526 points, or 1.45%, the S&P 500 index was down 1.81%, the Nasdaq Composite was down 2.51% and the Russell 2000 was down 1.64% shortly before 11 a.m. ET.
The 10-year Treasury yield continued to climb, breaking the 1.8% threshold early in the session.
While the pain continued in the convertibles secondary space, Zynga Inc.’s convertible notes were a bright spot following news the social video game company would be acquired.
There was about $80 million in reported volume early in Monday’s session with Zynga’s convertible notes accounting for about one-fourth of the activity on the tape.
Zynga’s 0% convertible bonds due 2026 jumped more than 11 points outright.
The bonds were changing hands at 101.375 early in the session with about $10 million in reported volume, according to a market source.
Zynga’s 0.25% convertible notes jumped more than 13 points outright.
The 0.25% convertible notes were changing hands at 118.625 early in the session.
Zynga’s stock was trading at $8.62, an increase of 43.83%, shortly before 11 a.m. ET.
Former convertible bond issuer Take-Two Interactive Software Inc. announced it would acquire Zynga in a cash and stock transaction with an enterprise value of $12.7 billion.
Take-Two will purchase Zynga shares for $9.86 with Zynga shareholders receiving $3.50 in cash and $6.36 in Take-Two stock, the Wall Street Journal reported.
The convertible notes would remain outstanding in the transaction with the value of the bonds to be based on Take-Two following the completion of the acquisition, a source said.
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