Morning Commentary: JetBlue in focus, down outright on acquisition bid

By Abigail W. Adams

Portland, Me., April 6 – The convertibles primary market remained on hold early Wednesday as equities extended declines from Tuesday’s session.

Selling pressure returned to stocks as markets once again attempt to price in the implications of a simultaneous aggressive rate hike schedule and balance sheet run-off from the Federal Reserve.

The Dow Jones industrial average was down 288 points or 0.86%, the S&P 500 index was down 1.29%, the Nasdaq Composite was down 2.27% and the Russell 2000 index was down 1.37% shortly before 11 a.m. ET.

The convertibles secondary space was again quiet amid the sell-off in equities.

There was $70 million in reported volume a little more than one hour into Wednesday’s session with few names seeing concentrated trading activity.

JetBlue Airways Corp.’s 0.5% convertible notes due 2026 were in focus with the notes down outright as stock continued to sell off following news of the airline’s acquisition bid for Spirit Airlines Inc.

The 0.5% convertible notes fell 3.5 points outright with stock off more than 5.5%.

The notes were changing hands at 87.5 versus a stock price of $12.41 early in the session.

There was $5 million in reported volume.

JetBlue stock was changing hands at $12.84, a decrease of 5.9%, shortly before 11 a.m. ET.

The losses added to Tuesday’s 7% decline.

Stock was under pressure after the airline announced it was bidding $3.6 billion for Spirit Airlines, challenging the Frontier Group Holdings and Spirit Airlines merger agreement.

“They’re going to have to consider it,” a source said.

The deal values Spirit Airlines at $33 a share, a 50% premium over Spirit’s April 4 closing stock price of $21.99 and a $3 premium over Frontier’s offer.

While Spirit Airlines’ stock was under pressure with the broader markets early Wednesday, it has surged more than 20% since news broke about the takeover bid.

Spirit stock was $26.41, a decrease of 1.91%, shortly before 11 a.m. ET.

However, the airline’s 1% convertible notes due 2026 have not been active.

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