Envestnet convertible notes active; Silicon jumps; equities have another good day

Chicago, July 20 – The market does not love surprises, but pessimistic fears about earnings are turning to collective, small sighs of relief as investment-grade companies work through the first week of second-quarter earnings and results are less dire than expected.

The relief is giving the equity part of Wall Street a boost, lifting some boats on the rising tides.

The three-day window in the July 18 week, with more earnings on the near horizon, has not yet seemed the moment an issuer has been waiting on to price new paper,

Cytokinetics Inc. was the last big American dollar issue to price in the convertible bond space, a long distant memory of 20 days ago.

The U.S. market has been dry for all of July.

Late in the day on Wednesday, a source noted $451 million of bonds were changing hands in secondary activity – with familiar names and less liquid issues clamoring through the hot summer day.

Activity was diverse and the volume leader did not make it past $20 million late in the day.

The top six most active companies, combined, accounted for about $78 million of the action.

Envestnet

Envestnet Inc.’s 0.75% convertible notes due 2025 were more active than normal on Wednesday with more than $15 million on the tape late in the afternoon.

The bonds were trading in a range of 86 to 87 throughout the day, roughly in line with where they have been, as they have tended to trade in a tight range of approximately 84 to 87½ over the past month.

The conversion ratio is 9.37.

Stock ended the day up at $53.91, 9.46% higher than where it was five days ago. On Tuesday, the stock closed at $52.49 making it 2.71% better on the day.

The activity on the bonds, which was dispersed, put them near the lead on volume in the convertibles sector during the day.

Southwest Airlines

The activity on the Southwest Airlines Co. 1.25% convertibles due 2025 (Baa1/BBB) does seem to be tapering off.

They still held the first tier on the volume chart on Wednesday, but only narrowly in the afternoon.

Several weeks ago, when the bonds took over the secondary market, volume was in the $60 million per day range.

Volume was just $17 million on the day late in the afternoon, and the price was climbing higher than where it ended on Monday.

They were marked above 132, nearing 133. Late Tuesday trading had the notes just starting to break above 131.

The airline’s stock was nearly flat, closing at $41.50, lower by 0.048% on Wednesday.

Coinbase

Coinbase Global Inc.’s 0.5% convertible bonds were a different story.

The bonds due 2026 were 4 points better outright in one-day action, making the notes a leader for gains.

Fortunes were rising for the company’s stock, too.

The stock was 14.34% better on the day, closing at $75.27, a dramatic rise before noon ET that retreated a touch in the afternoon.

The move was topical.

In The Coinbase Blog, the company wrote that it “had no financing exposure” to Celsius, Three Arrows Capital and Voyager Digital – firms that have struggled to remain solvent due to insufficient risk controls.

Coinbase asserted that its customer assets are backed by collateral on a one-to-one basis and that the crypto company is balancing both short-term liabilities with longer duration assets.

Silicon

A name to keep an eye on, as some big trades made it on the board early in the day on Wednesday, is the 0.625% convertible bonds due 2025 from Silicon Laboratories Inc.

While the majority of the excitement had wrapped before noon ET, the trading price was anywhere from 5 to 8 points better than late afternoon deals on Tuesday.

The conversion ratio on the bonds is 8.2.

The semiconductor company will report earnings next week.

Mentioned in this article:

Envestnet Inc. NYSE: ENV

Southwest Airlines Co. NYSE: LUV

Coinbase Global Inc. Nasdaq: COIN

Silicon Laboratories Inc. Nasdaq: SLAB

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