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Morning Commentary: Illumina, Palo Alto Networks active in convertibles market
By Abigail W. Adams
Portland, Me., July 31 – With no new deals entering the convertibles space, focus has shifted to outstanding convertible notes with Tuesday’s volume leaders equity sensitive convertible notes.
There was $84 million on the tape early in Tuesday’s session, which is more than some sources were expecting.
Illumina Inc.’s 0% convertible notes due 2019 led trading activity with more than $8 million on the tape less than an hour into the session.
The 0% notes were trading about 2 points above parity at 126.8, according to market sources. Illumina stock was up more than 10% early Tuesday to $318.00.
The 0% notes were also active on Monday and dropping alongside stock in the run up to the biotech company’s second-quarter earnings report.
Illumina handily beat analyst expectations after the market close on Monday by reporting non-GAAP earnings per share of $1.43 for the second-quarter. Analyst had expected earnings per share of $1.11.
Palo Alto Networks Inc.’s 0.75% convertible notes due 2023 also remained volume movers in the secondary space early Tuesday.
The notes were seen trading at just under 97.8 early Tuesday with stock up less than 1%. More than $7 million of the bonds were on the tape early in Tuesday’s session.
The 0.75% notes were also major volume movers on Monday when they dropped to the 97 range with stock down almost 6% at market close. The 97 level marks the notes’ lowest outright price since their July 10 market debut.
Like most low-coupon bonds from the tech sector, the bonds are heavily hedged. “Everyone’s playing it for the vol.,” a market source said.
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