Investment-grade convertibles in focus; Axon drifts lower; Exact Sciences holds gains

By Abigail W. Adams

Portland, Me., Dec. 19 – It was a slow start to what is expected to be an uneventful week in the convertibles secondary space as accounts prepare to close the books on the worst year for the market since 2008.

Equity indexes were mixed early in the session but closed in the red as markets continue to digest the Federal Open Market Committee’s final meeting of 2022.

The Dow Jones industrial average closed Monday down 163 points, or 0.49%, the S&P 500 index closed down 0.90%, the Nasdaq Composite index closed down 1.49% and the Russell 2000 index closed down 1.45%.

There was $44 million in reported volume about one hour into the session and $400 million on the tape about one hour into the market close.

“Things are starting to slow down,” a source said.

Investment-grade names dominated the tape with Illumina Inc.’s soon-to-mature 0% convertible notes due Aug. 18, 2023 (BBB), Expedia Inc.’s 0% convertibles due 2026 (Baa3/BBB-/BBB-) and Pioneer Natural Resources Co.’s 0.25% convertible notes due 2025 (Baa1/BBB) seeing heavy volume.

Axon Enterprise Inc.’s 0.5% convertible notes due 2027 were also among the top traded names in the space with the notes drifting lower alongside stock.

Exact Sciences Corp.’s 0.375% convertible notes due 2027 remained active with the notes down outright but holding onto the dollar-neutral gains made last Friday.

High-grade issues

Investment-grade names dominated the tape on Monday although with little movement in price.

Illumina’s soon-to-mature 0% convertible notes due Aug. 15, 2023 continued to trade around 96.6 with a yield of about 5.375%, a source said.

There was $13 million in reported volume.

The notes have long been a yield play with the activity in the name attributed to cash raising.

Pioneer Natural Resources’ 0.25% convertible notes due 2025 also saw heavy volume with the deep in-the-money notes trading in line with stock.

The 0.25% convertible notes were changing hands at 221.875 versus a stock price of $217.23 in the late afternoon.

There was $11 million in reported volume.

Pioneer’s stock traded to a high of $222.47 and a low of $216.91 before closing the day at $218.07, a decrease of 0.39%.

Expedia’s 0% convertible notes due 2026 were also volume leaders with the notes seen at 87.375.

There was $11 million in reported volume.

Expedia’s stock traded to a high of $88.32 and a low of $84.72 before closing the day at $85.26, a decrease of 3.3%.

Axon lower

Axon’s 0.5% convertible notes due 2027 were active with the notes continuing to drift lower alongside stock.

The 0.5% convertible notes were changing hands at 100.875 versus a stock price of $167.85 early in the session, according to a market source.

They traded down to 100.375 in the late afternoon.

The notes were returning to par.

However, they were holding on hedge.

“Maybe they’re drifting in a little but not tremendously,” a source said.

There was $10.5 million in reported volume.

Axon’s stock traded to a low of $166.65 and a high of $171.42 before closing the day at $167.57, a decrease of 1.05%.

Axon’s 0.5% convertible notes were a part of the final wave of convertible issuance that hit the week of Dec. 5.

Exact Sciences holds

Exact Sciences’ 0.375% convertible notes due 2027 remained active on Monday.

While the notes were down outright alongside stock, they held onto the dollar-neutral gains made the previous session.

Exact Sciences’ 0.375% notes were down about 1.375 points outright with stock off more than 3.5%.

The notes were trading at 82.625 versus a stock price of $50.31 heading into the market close.

However, they remained 0.25 point to 0.5 point better on swap, a source said.

Exact Sciences’ stock traded to a low of $49.44 and a high of $53.32 before closing the day at $50, a decrease of 3.7%.

Exact Sciences’ stock and convertible notes surged last Friday after competitor Guardant Health Inc. released clinical results for a blood based colorectal cancer screening test that showed Exact Sciences Cologuard to be more effective.

The 0.375% notes due 2027 jumped 8 points outright with stock up 16%.

Mentioned in this article:

Axon Enterprise Inc. Nasdaq: AXON

Exact Sciences Corp. Nasdaq: EXAS

Expedia Inc. Nasdaq: EXPE

Illumina Inc. Nasdaq: ILMN

Pioneer Natural Resources Co. NYSE: PXD

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