Morning Commentary: Snap convertible notes ‘crushed’ post earnings in early trading

By Abigail W. Adams

Portland, Me., Oct. 21 – Friday was the day of Snap Inc. in the convertibles secondary space as its capital structure was “crushed” following a disappointing earnings report, a source said.

Snap’s 0.75% convertible notes due 2026 were the most active tranche with the notes falling 7 points outright with stock down more than 30%.

The 0.75% notes traded down to 81 in active trading.

They contracted 1 point to 1.5 points dollar-neutral on the move down.

Snap’s long-busted 0% convertible notes due 2027 were “holding up well,” with the conversion premium on the notes already over 600%.

The 0% notes were off about 1 point outright to 68.

While also long-busted, Snap’s 0.125% convertible notes due 2028 were hard hit amid the downturn in equities.

The 0.125% notes fell 4.5 points outright to 65 and contracted 3 points dollar-neutral.

“They’re longer-duration so it makes sense they would get crushed a little more,” a source said.

Snap’s stock traded down to $7.44, a decrease of 31.09%, in intraday trading.

While the social media company beat on the bottom line with earnings per share of 8 cents versus the breakeven expected, it came in short on the top line with revenue of $1.13 billion versus the $1.14 billion expected.

Snap also declined to provide fourth-quarter guidance.

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