Wayfair’s new convertible notes in focus, gain; Omeros below par; Datadog contracts

By Abigail W. Adams

Portland, Me., Aug. 13 – After a torrent of new deal activity that saw $3.68 billion of convertibles price over six deals after the market close on Tuesday, the primary market went quiet.

With no deals launched prior to the market open on Thursday, no more primary market activity is expected for the Aug. 10 week.

While there are deals in the pipeline for the week ahead, primary market activity may not parallel the volume of the current week, sources said.

Meanwhile, the secondary space remained strong on Thursday as equities continued to broach new heights in intraday trading.

New paper and company news were the catalyst for trading activity.

Wayfair Inc.’s newly priced 0.625% convertible notes due 2025 continued to dominate activity in the secondary space.

While the notes continued to gain on an outright basis, they were moving in line dollar-neutral, with the notes continuing to improve.

While volume was light, Omeros Corp.’s 5.25% convertible notes due 2026 dropped below par as stock continued to get crushed.

However, the notes continued to hold onto their dollar-neutral expansion.

Outside of the new paper, Datadog Inc.’s 0.125% convertible notes due 2025 were active with the notes contracting as stock popped following takeover speculation.

Varex Imaging Corp.’s 4% convertible notes due 2025 plummeted on an outright and dollar-neutral basis after its third-quarter earnings report sparked questions about the company’s future viability.

Wayfair in focus

Wayfair’s newly priced 0.625% convertible notes due 2025 continued to dominate activity in the secondary space.

While the notes gained on an outright basis, they were moving in line dollar-neutral, sources said.

The 0.625% notes traded up about 3 points outright with stock up more than 4%.

The notes were changing hands around 106 in the late afternoon.

There was more than $70 million in reported volume heading into the market close.

Wayfair stock traded to a high of $320.43 and a low of $305.01 before closing the day at $314.29, an increase of 4.16%.

The home decor e-commerce company’s 0.625% notes skyrocketed on their aftermarket debut with the notes closing Wednesday up 3.75 points dollar-neutral.

Omeros below par

While volume was light, Omeros’ newly priced 5.25% convertible notes due 2026 dropped below par as stock continued to get crushed.

The 5.25% notes were marked at 97.5 bid, 98.5 offered in the late afternoon with stock off another 5%.

Omeros stock traded to a high of $13.86 and a low of $12.80 before closing the day at $13.19, a decrease of 3.51%.

While the notes continued to sink outright, they held onto their dollar-neutral expansion, a source said.

The notes were up 2.5 to 3 points dollar-neutral on their aftermarket debut on Wednesday.

Omeros stock continued to sell off following a secondary offering, which priced concurrently with the convertible notes.

Omeros is one of several biotech companies working on a treatment for Covid-19.

Stock was also selling off alongside several biotech companies working on a treatment and vaccine for Covid-19 following news that Russia had registered a vaccine.

Datadog contracts

Datadog’s 0.125% convertible notes due 2025 were active on Thursday.

While the notes gained on an outright basis, they contracted dollar-neutral as stock popped following takeover speculation.

The 0.125% notes traded up more than 4 points outright with stock up as much as 10% in intraday activity.

The notes were changing hands at 121 in the late afternoon.

They were contracted about 1.5 points dollar-neutral, a source said.

Datadog stock traded to a high of $84.57 and a low of $76.92 before closing the day at $82.42, an increase of 7.58%.

Stock popped on speculation that salesforce.com had made an all-stock offer to acquire Datadog.

However, the 0.125% notes would lose as much as 6 points in a takeover, a source said.

The New York-based monitoring and analytics platform has been a takeover target in the past.

Cisco Systems Inc. attempted to buy Datadog for $7 billon in September 2019 prior to the company’s IPO.

Varex plummets

Varex Imaging’s 4% convertible notes due 2025 plummeted on an outright and dollar-neutral basis after the company’s third-quarter earnings report sparked questions about its future viability.

While volume was light, the 4% convertible notes dropped almost 20 points with stock down 20%.

The notes dropped to 82 on Thursday. They were previously trading around 102, according to Trace data.

The notes contracted about 2 points dollar-neutral.

Varex stock hit a new 52-week low in intraday activity. It traded to a high of $13.29 and a low of $11.28 before closing the day at $12.83, a decrease of 19.81%.

Varex reported a loss per share of 20 cents versus analyst expectations for a loss of 6 cents on Wednesday.

Revenue was $171.20 million versus analyst expectations for revenue of $172.52.

There is concern the company will not be able to comply with the covenants on its debt, a source said.

Mentioned in this article:

Datadog Inc. Nasdaq: DDOG

Omeros Corp. Nasdaq: OMER

Varex Imaging Corp. Nasdaq: VREX

Wayfair Inc. NYSE: W

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