MercadoLibre’s fortunes shift; Palo Alto convertibles reach new heights; Alteryx active

By Abigail W. Adams

Portland, Me., Aug. 24 – The convertibles secondary space rounded out the week with decent trading volume with $87 million on the tape early in the session and $300 million on the tape mid-afternoon.

MercadoLibre Inc.’s new 2% convertible notes due 2028 remained in focus with the notes making large gains on an outright basis and continuing to expand dollar-neutral after a rocky secondary market debut.

Palo Alto Networks Inc.’s 0.75% convertible notes due 2023 reached their highest outright price on Friday since hitting the market in mid-July as stock broke out to a new 52-week high.

The network and enterprise security company’s 0% convertible notes due 2019 were also active and broached double par amid the stock move.

Alteryx Inc.’s 0.5% convertible notes due 2023 saw a flurry of activity early in the session although trading of the notes died down into the afternoon. The notes surged alongside stock in recent months and are now trading at a premium to parity after pricing at a discount.

While trading of the notes was light, Cree Inc.’s new 0.875% convertible notes due 2023 were up slightly on an outright basis and maintained a modest dollar-neutral expansion on Friday.

MercadoLibre active

MercadoLibre’s new 2% convertible notes due 2028 remained the volume leader in the secondary space with more than $17 million of bonds in play early in the session and $36 million on the tape mid-afternoon.

The notes continued to make gains on an outright and dollar-neutral basis.

They were seen trading between 103.5 and 104.5 early in the session. They continued to gain strength into the afternoon, at one point trading north of 106, a market source said.

They were seen changing hands at 105.16 versus an equity price of $365.45. The notes again expanded 0.25 point to 0.375 point dollar-neutral after a 0.5 point expansion on Thursday.

MercadoLibre stock closed Friday at $367.54, an increase of 5.51%.

While the notes remain contracted from their issue price, it becomes less relevant the longer the notes are in the market, a source said.

MercadoLibre’s 2% convertible notes did an about face on Thursday and Friday after a rocky secondary market debut.

The 2% notes traded as low as 98.5 out of the gate on Wednesday before closing the day around par. They were contracted 1 point to 2 points dollar-neutral on Wednesday.

The deal “was not the most well received,” a market source said. “No one really wanted 10-year paper.”

However, the trajectory of the notes reflected a little bit of a herd mentality with the momentum initially negative but shifting course with the stock making large gains throughout the week.

Palo Alto’s new heights

Palo Alto’s 0.75% convertible notes due 2023 were also volume leaders in the secondary space with the notes reaching new outright heights as stock broke out to a new 52-week high.

The 0.75% notes were up 2 points outright. They were seen trading at 104 versus an equity price of $225.73.

Palo Alto’s 0% convertible notes due 2019 rose more than 7 points outright to broach double par. They were seen trading at 203.71 versus an equity price of $224.78 and closed the day at 203.92, according to market sources with about $20 million of the bonds on the tape by late afternoon.

The 0% notes were largely trading at parity.

Palo Alto priced $1.69 billion of the 0.75% notes in mid-July with proceeds to be used to fund the payments due upon the conversion, repurchase or maturity of the 0% convertible notes.

Palo Alto stock closed Friday at $225.42, an increase of 4.02% and a new 52-week high.

The stock was riding the strength of the tech sector on Friday, which was buoyed by earnings beats from industry leaders. Palo Alto is scheduled to report earnings on Sept. 6.

Alteryx rips

Alteryx’s 0.5% convertible notes due 2023 were active early in Friday’s session with about $5 million of the bonds on the tape, although trading of the notes dried up into the afternoon.

While Alteryx’s 0.5% notes struggled during bookbuilding and had a rocky secondary market debut, the notes surged in late July and early August and now trade at a premium to parity.

The notes were seen trading at 139.875 versus an equity price of $56.02. Alteryx stock closed Friday at $56.42, an increase of 2.71%.

The deal was reported to have struggled during bookbuilding with the $200 million deal pricing at a discounted reoffer price of 98. The notes initially lagged their issue price in secondary trading.

However, “the stock ripped to the upside,” a market source said.

Alteryx stock broke out to a new 52-week high on Aug. 9 after the data and analytics company’s second-quarter earnings report. Alteryx stock was $31.11 when the 0.5% convertible notes priced mid-May.

Cree maintains

While trading was light, Cree’s new 0.875% convertible notes due 2023 saw a slight improvement on an outright basis and maintained its dollar-neutral expansion.

The 0.875% notes were seen up about 0.75 point outright to trade just south of 101, a market source said. The notes were largely moving in line dollar-neutral and maintaining their 0.25 point expansion.

Cree stock closed Friday at $46.68, an increase of 1.43%.

Mentioned in this article:

Alteryx Inc. NYSE: AYX

Cree Inc. Nasdaq: CREE

MercadoLibre Inc. Nasdaq: MELI

Palo Alto Networks Inc. NYSE: PANW

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