Snap does U-turn, convertible notes jump following earnings; Unity Software gains

By Abigail W. Adams

Portland, Me., Feb. 4 – It was another volatile day in the convertibles secondary space with equity markets again wavering between gains and losses before closing the day strong.

While the tech sector led losses during Thursday’s session, it led Friday’s rally after Amazon.com, Inc.’s earnings smashed analyst expectations.

The Dow Jones industrial average was the sole index to close the day in negative territory.

The index closed the day down 21 points, or 0.06%. However, the S&P 500 index closed up 0.52%, the Nasdaq Composite index closed up 1.58% and the Russell 2000 index closed up 0.55%.

The convertibles secondary space rallied with equities with the market up about 0.5 point, a source said.

However, Friday was a choppy session with the 10-year treasury yield crossing the 1.9% threshold following a strong jobs report. The yield ticked as high as 1.938% before closing the day at 1.918%.

Snap Inc.’s convertible notes were again in focus on Friday. After falling during the previous session in anticipation of disappointing earnings, they pulled a U-turn and made large gains on an outright and dollar-neutral basis as stock skyrocketed.

Unity Software Inc.’s 0% convertible notes due 2026 also improved as stock jumped following better-than-expected earnings.

Snap’s U-turn

Snap’s convertible notes pulled a U-turn and posted strong gains on an outright and dollar-neutral basis on Friday following a strong earnings report.

The 0% convertible notes due 2027 jumped 6.75 points outright with stock up more than 50%.

They were changing hands at 89 versus a stock price of $37.92 early in the session, according to a market source.

They continued to climb to close the day at 90.

The notes expanded 0.5 point to 0.75 point dollar-neutral, a source said.

Snap’s 0.75% convertible notes due 2026 shot up more than 30 points outright.

The notes were changing hands at 180.5 versus a stock price of $37.40 early in the session.

The notes expanded 2 points dollar-neutral.

Snap’s stock traded to a low of $34.10 and a high of $40.65 before closing the day at $38.91, an increase of 58.82%.

The convertible notes were under pressure on Thursday as stock cratered in anticipation of disappointing earnings following Meta Platforms Inc.’s, formerly known as Facebook Inc., results.

The 0% notes sank to an 83-handle during Thursday’s session and the 0.75% notes fell 18 points and contracted 0.5 point dollar-neutral, a source said.

However, Snap surprised the market with its first profitable quarter on a net income basis since going public.

Snap reported earnings per share of 22 cents versus analyst expectations for earnings of 10 cents. Revenue was $1.3 billion versus analyst expectations for revenue of $1.2 billion.

Unity’s earnings

Unity Software’s struggling 0% convertible notes due 2026 were lifted following a better-than-expected earnings report.

The 0% convertible notes gained 2 points outright with stock up 17%.

The notes were changing hands at 85 in the late afternoon.

The notes expanded about 0.5 points dollar-neutral.

Unity’s stock traded to a low of $93.89 and a high of $111.02 before closing the day at $108.66, an increase of 17.42%.

Stock jumped after a large earnings beat.

The video game software development company reported a loss per share of 5 cents versus analyst expectations for a loss per share of 7 cents.

Revenue was $315.86 million versus analyst expectations of $295.71 million.

Mentioned in this article:

Snap Inc. NYSE: SNAP

Unity Software Inc. NYSE: U

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