AMAG convertibles in focus; Red Hat reaches new heights; Oil States drops below par

By Abigail W. Adams

Portland, Me., Feb. 15 – AMAG Pharmaceuticals Inc.’s 3.25% convertible notes due 2022 dominated the secondary market on Thursday, which saw another day of light trading volume, according to a market source.

The struggling convertible notes, which move on a delta of 65% to 70%, climbed about 10 points on an outright basis to trade in the 97 range, as its underlying stock soared in response to Food and Drug Administration approval of one of AMAG’s products.

Red Hat Inc.’s equity sensitive 0.25% convertible notes due 2019 reached new heights on Thursday as its stock broke its 52-week high. The 0.25% notes traded up to 190 after solidifying around 170.

Oil States International Inc.’s recently priced 1.5% convertible notes due 2023 joined the chorus of recently priced deals now trading below par. The 1.5% notes were wrapped around 101 until last week when they began to dip below par.

The notes were solidified around 98 in scattered trading on Thursday after the Houston-based oilfield services company released its fourth-quarter earnings report after the market close Wednesday.

JPMorgan Chase Financial Co. LLC’s 0.25% cash-settled convertible notes linked to Voya Financial, Inc. stock gained strength on Thursday, climbing to 101 after spending most of February at or below par.

While the primary market has been largely silent over the past week and a half, Thursday began with the pricing of another small convertible preferred stock offering.

In an $18 million offering of class A and class B units announced prior to the market open Thursday, Inpixon priced class B units consisting of one share of series 3 convertible preferred stock and one warrant.

Much like Avinger Inc.’s pricing of 17,979 shares of series B convertible preferred stock and series 1 and series 2 warrants prior to the market open Wednesday, the deal was a “tiny penny-stock deal,” a market source said.

AMAG dominates

AMAG Pharmaceuticals’ 3.25% convertible notes due 2022 dominated trading activity in another light volume day in the convertibles space.

The struggling convertible notes climbed about 10 points on an outright basis to trade in the 97 range as its underlying equity soared.

AMAG stock closed Thursday at $17.95, an increase of 29.14%. The notes appeared to be moving on a 65% to 70% delta, a market source said.

AMAG stock was recently upgraded to a buy rating by analysts from Janney Montgomery Scott, who upped the price target to $45.00 from $16.65.

The Waltham, Mass.-based pharmaceutical company announced Thursday the U.S. FDA had approved a drug-device combination product to reduce the risk of preterm birth in pregnant women that have experienced preterm birth in the past.

AMAG is collaborating on the drug-device product with Antares Pharma Inc. AMAG will produce and supply the drug to Antares, which will assemble and package the device.

AMAG’s 3.25% convertible notes have largely traded in the mid 80s since November when the company lowered its 2017 revenue guidance. AMAG’s 2.5% convertible notes due 2019 only have $20 million outstanding and probably won’t trade, a market source said.

Red Hat’s new heights

Red Hat’s equity sensitive 0.25% convertible notes due 2019 reached new heights on Thursday as its underlying equity broke its 52-week high. The 0.25% notes traded up to 190 as the Raleigh, N.C.-based software company’s stock closed the session at $140.07, an increase of 4.38%.

The convertible notes were one of the top producers of returns for the Bloomberg Barclays U.S. Convertibles Index in 2017.

They have largely been solidified in the 170s. However, they have been active and on the rise since Monday.

Red Hat has been in the news recently with chief technologist David Egts featured in an interview Wednesday about Red Hat’s augmentation with layers approach to updating applications.

Red Hat chief information officer Mike Kelley was featured in an interview in a separate publication on Monday and spoke about the company’s open hybrid cloud product.

Red Hat also acquired start-up CoreOS for $250 million at the end of January.

Oil States down, JPMorgan up

Oil States’ recently priced 1.5% convertible notes were strong on their debut and largely held above par while most other new deals were trading well below par. However, the convertible notes have waivered between 98 and 100 since last week.

The release of the company’s fourth-quarter earnings report after the market close Wednesday did little to improve the position of the 1.5% convertible notes, which solidified around 98 in scattered trades on Thursday.

Oil States stock was down at the market close Thursday to $26.95, a decrease of 6.26%.

Oil States reported a net loss of $37.9 million, or 76 cents per diluted share, for the fourth quarter and a net loss of $84.85 million, or $1.69 per diluted share, for 2017.

While Oil States lost ground, JPMorgan’s 0.25% convertible notes due 2023 gained strength on Thursday. The notes traded up to 101 after trading in the 97 to 98 range earlier in the week, according to Trace data.

The notes are linked to Voya Financial stock, which closed Thursday at $50.55, a decrease of 1.25%.

Inpixon’s deal

In a small offering described as a “penny-stock deal,” Inpixon priced $18 million of class A and class B units. The class B units were composed of a convertible preferred stock and warrant, with each convertible into 426 shares of common stock.

The conversion price for the preferred stock is $2.35, the same price for a class A unit, which consists of one common share and a warrant for one common share. The warrants carry a strike price of $3.50 and expire in five years.

Inpixon’s offering is the second small convertible preferred stock deal to price in as many days. Avinger priced 17, 979 shares of series B convertible preferred stock and series 1 and series 2 warrants prior to the market open Wednesday.

There is no dividend on either convertible preferred stock offering. In the case of Avinger, the convertible preferred stock was essentially just a book to hold the warrants, a market source said.

Mentioned in this article:

AMAG Pharmaceuticals Inc. Nasdaq: AMAG

Avinger Inc. Nasdaq: AVGR

Inpixon Nasdaq: INPX

Oil States International Inc. NYSE: OIS

Red Hat Inc. NYSE: RHT

Voya Financial, Inc. NYSE: VOYA

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