Snap convertible notes ‘crushed’ post earnings; Twitter paper gives back gains

By Abigail W. Adams

Portland, Me., Oct. 21 – It was a quiet end to a whipsaw week as equities shrugged off Treasury yields that climbed to their highest level in more than 15 years.

Equities closed a volatile week with a volatile session as equities swung between gains and losses in early trading before staging a strong rally to end with daily and weekly gains

The Dow Jones industrial average closed Friday up 749 points, or 2.47%, the S&P 500 index closed up 2.37%, the Nasdaq Composite index closed up 2.31% and the Russell 2000 index closed up 2.22%.

Renewed optimism over a dovish pivot in early 2023 reignited the risk-on sentiment that equity markets launched the week with.

Social media companies were the theme of the day with Snap Inc.’s capital structure “crushed” following a disappointing earnings report, a source said.

Twitter Inc.’s 0.25% convertible notes due 2024 gave back their gains from the previous session as the company’s acquisition faced renewed doubts.

Snap crushed

Snap’s capital structure was “crushed” after the social media company posted a disappointing earnings report.

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

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

They were seen changing hands at 80.75 later in the session.

The notes contracted 1 point to 1.5 points dollar-neutral on the move down, sources said.

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 to a high of $8.15 and a low of $7.33 before closing the day at $7.76, a decrease of 28.08%.

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 but warned that revenue growth would continue to decelerate, CNBC reported.

Twitter gives back gains

Twitter’s 0.25% convertible notes due 2024 were giving back its gains from the previous session as further doubts were cast over Elon Musk’s acquisition of the company.

The 0.25% convertible notes fell 2.5 points outright with Twitter’s stock down almost 5%.

The notes returned to a 108-handle and were changing hands at 108.375 in the mid-afternoon.

The notes gave back their gains from the previous session when they traded closer to their takeout price of 110 on renewed confidence Musk’s acquisition of the company would go through.

Twitter’s 0% convertible notes due 2026 were inactive on Friday.

The notes climbed to 98 on Thursday on renewed confidence about the takeover.

Twitter’s stock traded to a low of $49.55 and a high of $50.75 before closing the day at $49.89, a decrease of 4.88%.

Just as the market was gaining confidence in the takeover, news broke that the U.S. government was considering subjecting some of Musk’s ventures to a national security review, including his takeover of Twitter.

Musk initially proposed and, after attempting to renege on the offer, agreed to complete his purchase of Twitter for $54.20 a share.

Twitter’s convertible notes would be taken out in the transaction with the 0% convertible notes redeemed at par and the 0.25% convertible notes taken out according to the takeout matrix, a source said.

Mentioned in this article:

Snap Inc. NYSE: SNAP

Twitter Inc. NYSE: TWTR

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