Morning Commentary: One Medical convertible notes jump on Amazon buyout news

By Abigail W. Adams

Portland, Me., July 21 – It was another quiet morning in the convertibles secondary space with the primary market dormant as earnings pour in.

After a choppy open, equity indexes pulled back from their recent rally.

The Dow Jones industrial average was down 228 points, or 0.71%, the S&P 500 index was down 0.31%, the Nasdaq Composite index was down 0.16% and the Russell 2000 index was down 0.70% shortly before 11 a.m. ET.

There was $90 million on the tape about one hour into the session with Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) accounting for $18 million of the total reported volume.

However, 1Life Healthcare Inc.’s (One Medical) 3% convertible notes due 2025 were the largest movers in terms of price with the notes jumping outright following news Amazon was buying out the health care technology company.

The 3% convertible notes jumped 10 points outright to trade at 98.5.

There was $5 million in reported volume.

The small, illiquid issue rarely trades in round lots. However, the last large trade of the notes late last week was on an 88-handle, a source said.

One Medical’s stock skyrocketed on the news and was changing hands at $17.23, an increase of 69.25%, shortly before 11 a.m. ET.

News broke prior to the market open on Thursday that Amazon would acquire One Medical for $18.00 per share, including debt with an enterprise value of $3.9 billion.

The notes will be taken out in the all-cash transactions, a source said.

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