Morning Commentary: Twitter slips on swap; U.S. Steel slides outright; new A. Schulman quiet

By Rebecca Melvin

New York, April 29 – Twitter Inc.’s dual convertible bonds were lower in active trade on both an outright and swap basis early Wednesday after the San Francisco-based social media company reported disappointing earnings, a New York-based trader said.

A second trader said the bonds were roughly “in line.”

Twitter’s 0.25% convertibles due 2019 were quoted at 92.5 bid, 93 offered with the underlying stock at $40.00. Previously the paper was at par. A second level on the issue was given at 92.75 bid, 93.25 offered.

Twitter’s 1% convertibles due 2021 were quoted a little lower at 91.5 bid, 92 offered versus the same share price.

“They were par, so it’s a 7-point move for the outrights,” a trader said.

Twitter shares were down $2.38, or 5.6%, at $39.88 at late morning, a down move that comes on top of a 20% slide late Tuesday when the quarterly results were leaked early ahead of the closing bell.

The share were previously around $50.00.

Twitter revenue for the second quarter is now expected to be $470 million to $485 million, which is below the average of analysts’ forecasts for $538 million.

Twitter’s first-quarter net loss widened to $162 million from a loss of $132.4 million in the year-earlier period. Excluding some items, profit was 7 cents per share, which beat analysts’ estimates for 4 cents a share profit.

The company cut full-year guidance to $2.17 billion to $2.27 billion from its previous range of $2.3 billion to $2.35 billion.

United States Steel Corp.’s convertibles fell on an outright basis and were roughly in line on a hedged basis after the Pittsburgh-based steel maker reported a surprise loss and cut its full-year profit outlook, citing climbing imports related to the strong dollar.

U.S. Steel’s 2.75% convertibles were seen at 121 bid, 121.5 offered versus an underlying share price of $24.27. Previously the bonds were at 129 to 130.

U.S. steel shares were down about 10% last.

A. Schulman Inc.’s newly priced 6% convertible special stock was not heard in trade after the Akron, Ohio-based plastics and resins supplier priced $110 million of the perpetual shares at the rich end and beyond the rich end of talk, according to market sources.

A. Schulman’s shares were up 2% at $47.75.

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