Morning Commentary: Dropbox in focus, convertible notes fall outright after earnings

By Abigail W. Adams

Portland, Me., Feb. 16 – The convertibles primary market saw its second consecutive week with no new issuance, a disappointment to many with demand from the buyside strong.

While several deals were heard to be in the works, they have yet to materialize.

Refinancings will be the driving force of issuance once the primary market reactivates with the need for capital otherwise low, a source said.

However, refinancing deals “aren’t overly exciting,” the source said. “People are bummed.”

As market players awaited new paper, the secondary space remained active with earnings-related volatility continuing to spark large movements in the space.

Equity indexes were again in the red following the latest Producer Price Index report, which came in hotter-than-expected and supported a higher-for-longer rate scenario.

The Dow Jones industrial average was down 73 points, or 0.18%, the S&P 500 index was down 0.21%, the Nasdaq Composite index was down 0.46% and the Russell 2000 index was down 1.02% shortly before 11 a.m. ET.

There was $82 million in reported volume about one hour into the session with Dropbox Inc.’s convertible notes dominating the tape.

Dropbox’s 0% convertible notes due 2028 and 0% convertible notes due 2026 sank outright as stock plunged after earnings.

The 0% convertible notes due 2028 notes sank 10 points outright with stock down almost 20%.

The notes were trading at 96.375 early in the session.

There was $12 million in reported volume.

Dropbox’s 0% convertible notes due 2026 were down 7 points outright and were trading at 95.75 early in the session.

There was $6 million in reported volume.

Dropbox’s stock was changing hands at $26.22, a decrease of 19.51%, shortly before 11 a.m. ET.

While Dropbox beat expectations on earnings, stock sank after weak guidance and a decrease in users.

Dropbox reported earnings per share of 50 cents versus the 48 cents expected.

Revenue was $635 million versus the $632.5 million expected.

Several analysts downgraded the company’s stock following the earnings results.

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