Morning Commentary: Rocket Lab notes hit new heights; Snap buys back convertibles

By Abigail W. Adams

Portland, Me., Feb. 12 – The convertibles primary market was quiet early Monday although refinancing activity generated headlines.

Less than one week after Snap Inc.’s stock plunged on earnings results, the social media company announced a privately negotiated buyback of its 0.25% convertible notes due 2025 and 0.75% convertible notes due 2026.

While it was unclear whether the buybacks had hit the tape, Snap’s 0.75% convertible notes were lifted early in the session.

In the latest development in the ensuing investor battle with EchoStar Corp., EchoStar announced the cancellation of its exchange offer for DISH Network Corp.’s 0% convertible notes due 2025 and 3.375% convertible notes due 2026 with the minimum tender condition for the exchange not satisfied.

DISH’s convertible notes were not active early in the session following the news.

The anticipated legal action of DISH DBS Corp. creditors over EchoStar’s mid-January asset reshuffle has complicated trading of the convertible notes.

While the refinancing activity announced early Monday did not involve new issuance, market players still expect an active pipeline driven by refinancing needs.

Meanwhile, equity markets continued to eke out gains early Monday with the Dow Jones industrial average up 15 points, or 0.04%, the S&P 500 index up 0.06%, the Nasdaq Composite index up 0.22% and the Russell 2000 index up 1.25% shortly before 11 a.m. ET.

There was $87 million in reported volume about one hour into the session with investment-grade issues continuing to dominate the tape.

However, Rocket Lab USA Inc.’s recently priced 4.25% convertible notes due 2029 continued to shoot higher as stock popped early Monday on an analyst upgrade.

Snap’s buyback

Snap announced a privately negotiated buyback of its 0.25% convertible notes due 2025 and 0.75% convertible notes due 2026 early Monday, less than one week after the company’s convertible notes suffered losses as stock plunged on disappointing earnings.

The camera and social media company announced that it would repurchase $100 million in principal of its 0.25% convertible notes due 2025 for $97.8 million and $351.2 million in principal of its 0.75% convertible notes due 2026 for $336.4 million in privately negotiated transactions.

While it was unclear whether the buyback trades had hit the tape, the 0.75% convertible notes were lifted on the news.

The 0.75% convertible notes added about 2.5 points outright to trade at 96.5 early in the session, according to a market source.

There was $4 million in reported volume.

Snap’s stock was trading at $12, an increase of 8.01%, shortly before 11 a.m. ET.

The 0.75% convertible notes fell about 14 points outright and contracted 0.5 point on hedge last Wednesday as stock plunged a little more than 34% following earnings.

Rocket Lab’s new high

Rocket Lab’s 4.25% convertible notes due 2029 continued to shoot higher early Monday as stock soared following an analyst upgrade.

The 4.25% notes added 7 points outright with stock up more than 9%.

They were trading at 115.125 versus a stock price of $4.72 early in the session, according to a market source.

There was $7 million in reported volume.

Rocket Lab’s stock was trading at $4.68, an increase of 7.72%, shortly before 11 a.m. ET.

Stock surged after a Citi analyst reinstated coverage of the stock with a “buy” rating and a $6 price target.

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