Convertibles market quiet; Twitter up outright, down on hedge; Western Digital active

By Abigail W. Adams

Portland, Me., April 18 – It was a slow return from the long weekend with the convertibles primary market dormant and the secondary space quiet on a choppy day for equities.

No deals are expected over the course of the week.

However, the calendar is expected to pick up the last week of April into May provided markets remain stable.

Equities remained volatile on Monday although in thin volume with indexes wavering between gains and losses before closing the day in the red.

The Dow Jones industrial average closed the day down 40 points, or 0.11%, the S&P 500 index closed down 0.02%, the Nasdaq Composite index closed down 0.14% and the Russell 2000 index closed down 0.82%.

Trading volume in the secondary space was anemic with $27 million in reported volume more than one hour into the session and $165 million on the tape about one hour before the market close.

“This week is going to be slow,” a source said.

Twitter Inc.’s 0% convertible notes due 2026 remained in focus with the notes up outright but contracting dollar-neutral as the social media company takes defensive measures to protect itself from Tesla Inc. CEO Elon Musk’s hostile takeover bid for the company.

Western Digital Corp.’s 1.5% convertible notes due 2024 continued to see high-volume activity although with little movement in price.

Twitter notes eyed

Twitter’s 0% convertible notes due 2026 remained in focus on a quiet trading day as investors digest the latest developments in Musk’s takeover bid for the social media site.

The 0% notes gained about 2 points outright with stock up 7%.

The notes were changing hands between 90 and 90.5 for the majority of Monday’s session.

However, they traded as high as 91 as stock gained strength into the close.

The notes contracted about 0.5 point dollar-neutral on the move up, a source said.

Twitter’s 0.25% convertible notes due 2024 saw light volume on Monday.

However, the equity-sensitive notes gained about 1.5 points outright to trade at 110 in the late afternoon.

Twitter’s stock traded to a low of $44.36 and a high of $48.73 before closing the day at $48.51, an increase of 7.61%.

Twitter has been in focus the past two weeks due to Musk’s offer for the company.

Musk announced a hostile takeover bid for the company valuing it at $54.20 per share last Thursday after disclosing a 9.2% stake the previous week.

Twitter is taking steps to protect itself from the takeover initiative.

The company announced a dividend of one right to purchase a one-thousandth of a share of its series A participating preferred stock at a strike price of $210 for each outstanding common share.

The offering imposes a penalty for any person or group that acquires 15% or more of Twitter common stock without the approval of the board.

The rights agreement is meant to “protect stockholders from coercive or otherwise unfair takeover tactics,” and “render more difficult or discourage a merger,” according to an 8-K filing with the Securities and Exchange Commission.

Western Digital active

Western Digital’s 1.5% convertible notes due 2024 were active on Monday although with little movement in price.

The 1.5% notes were changing hands at 95.75 in the late afternoon.

The yield on the notes was about 4%.

While the notes are not equity sensitive, Western Digital’s stock was strong on Monday, closing the day at $47.28, an increase of 2.03%.

The short-duration notes trade for the yield, which is still attractive compared to Treasuries, a source said.

The yield on the two-year Treasury note settled at 2.469% on Monday.

Mentioned in this article:

Twitter Inc. NYSE: TWTR

Western Digital Corp. Nasdaq: WDC

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