Rapid7 in focus on earnings miss; Omnicell improves outright, gains dollar-neutral

By Abigail W. Adams

Portland, Me., Nov. 3 – The convertibles secondary space was quiet on Thursday but showed signs of firming with the market paring its losses from early in the session to close the day largely unchanged, sources said.

Equity indexes remained in the red on Thursday as the market continued to digest Federal Reserve chair Jerome Powell’s hawkish comments on Wednesday.

The Dow Jones industrial average closed Thursday down 147 points, or 0.46%, the S&P 500 index closed down 1.06%, the Nasdaq Composite index closed down 1.73% and the Russell 2000 index closed down 0.53%.

Earnings-related volatility continued to push outstanding issues into the spotlight with Rapid7 Inc. the name of the day on Thursday.

Rapid7’s convertible notes tumbled outright with stock the latest to get crushed post-earnings.

However, the cybersecurity firm’s 2.25% convertible notes due 2025 saw a large dollar-neutral expansion on the move down.

Omnicell Inc.’s 0.25% convertible notes due 2025 remained active on Thursday with the notes improving outright and continuing to add dollar-neutral as stock rebounded from its 34% drop the previous session.

While volume was light, DISH Network Corp.’s convertible notes continued to take a hit on the company’s $2 billion offering of five-year senior secured notes, which is expected to price on Friday.

Rapid7’s earnings

Rapid7’s convertible notes were in focus on Thursday with the cybersecurity company’s stock the latest to get crushed post-earnings.

Rapid7’s 0.25% convertible notes due 2027 sank 5 points outright to a 72-handle.

The notes were changing hands at 72.5 in the late afternoon with a yield of about 7.78%.

While down outright, the notes were moving in line dollar-neutral and unchanged on hedge.

However, Rapid7’s 2.25% convertible notes due 2025 saw a large dollar-neutral expansion on the move down.

The 2.25% convertible notes fell 7 points outright with stock down more than 20%.

The notes were seen at 92.75 in the late afternoon.

They expanded 4 points dollar-neutral, a source said.

Rapid7’s stock traded to a high of $33.43 and a low of $29.27 before closing the day at $30.19, a decrease of 22.73%.

Rapid7 reported a large earnings beat on the bottom line with earnings per share of 14 cents versus the 5 cents recommended.

However, the company missed top line expectations with revenue of $175.76 million versus analyst expectations for revenue of $176.24 million.

Stock tanked after the company issued weak fourth-quarter guidance and downwardly revised its full-year revenue forecast.

Omnicell gains outright

Omnicell’s 0.25% convertible notes due 2025 remained active on Thursday with the notes paring their outright losses and continuing to add on hedge as stock rebounded from its 34% drop the previous session.

The 0.25% convertible notes gained 4 points outright with stock up more than 7%.

The notes traded up to 89 in the late afternoon.

The notes continued to expand dollar-neutral as stock bounced back.

Omnicell’s stock traded to a high of $54.71 and a low of $48.52 before closing the day at $53.88, an increase of 7.76%.

The 0.25% convertible notes sank 13 points outright but expanded 1 point dollar-neutral on Wednesday after the company’s downwardly revised fourth-quarter guidance sent its stock into a tailspin.

DISH down

While volume was light, DISH’s convertible notes were taking a hit on the satellite broadcaster’s $2 billion offering of five-year senior secured notes in the high-yield market.

DISH’s 3.375% convertible notes due 2026 were the hardest hit by the new offering with the convertible notes primed over by the new secured paper, a source said.

The 3.375% convertible notes traded down to 67 on Thursday.

They contracted another 1 point dollar-neutral after falling 1 point dollar-neutral on Wednesday when the high-yield deal was announced.

DISH’s 2.375% convertible notes due 2024 were off about 0.5 point outright to 90.5 on Thursday.

The 2024 notes have held up comparatively well with the maturity of the notes falling inside the maturity of DISH’s new secured notes.

DISH’s stock traded to a high of $14.41 and a low of $13.46 before closing the day at $13.72, a decrease of 5.70%.

DISH announced a $2 billion offering of five-year non-call two-year senior secured notes (Ba3/B+) on Wednesday with pricing expected on Friday.

Early whispers have the notes coming with an original issue discount of 2 points for an all-in yield in the mid- to high 11% area.

Moody’s Investors Service downgraded DISH’s convertible notes to B3 from B2 as a result of the new offering.

Mentioned in this article:

DISH Network Corp. Nasdaq: DISH

Omnicell Inc. Nasdaq: OMCL

Rapid7 Inc. Nasdaq: RPD

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