MongoDB convertible notes in focus on earnings beat; Zscaler rises; airlines active

By Abigail W. Adams

Portland, Me., June 2 – While the convertibles secondary space stood poised to close a quiet week quietly, the market tone dramatically improved with risk of government default in the rear-view, the Fed signaling a pause in rate hikes and the non-farm payrolls report signaling a resilient economy.

Equity indexes were off to the races with the Dow Jones industrial average closing Friday up 701 points, or 2.12%, the S&P 500 index closing up 1.45%, the Nasdaq Composite index closing up 1.07% and the Russell 2000 index closing up 3.4%.

There was $113 million on the tape about one hour into the session and $477 million on the tape about one hour before the market close with investment-grade trades taking a backseat to activity sparked by topical news.

MongoDB Inc.’s deep-in-the-money 0.25% convertible notes due 2026 dominated activity in the secondary space as stock skyrocketed more than 30% after a large earnings beat.

Zscaler Inc.’s 0.125% convertible notes due 2025 also powered higher alongside stock following earnings.

Airlines saw a busy session with Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) and American Airlines Group Inc.’s 6.5% convertible notes due 2025 rising as the sector’s stock made strong gains on upwardly revised earnings forecasts.

MongoDB’s day

MongoDB’s 0.25% convertible notes due 2026 were the name of the day on Friday with the notes catapulted higher with the company’s stock one of the best performers on a strong day for the market.

The convertible notes added 12 points outright early in the session with stock up more than 30%.

However, the notes moved lower as stock gave back some gains as the session progressed.

The 0.25% convertible notes were changing hands at 188.375 early in the session.

They were wrapped around 182.5 in the late afternoon.

There was $61 million in reported volume.

The in-the-money convertible notes were moving on a heavy hedge of about 88% heading into Friday’s session.

The hedge on the notes mostly increased during the session due to the surge in stock.

MongoDB’s stock traded to a low of $370 and a high of $397.98 before closing at $376.30, an increase of 28.01%.

Stock skyrocketed after the software company became the latest from the tech sector to trounce earnings expectations.

MongoDB reported earnings per share of 56 cents versus the 19 cents expected on revenue of $368.28 million versus the $347.04 million expected.

Zscaler’s earnings

Zscaler’s 0.125% convertible notes due 2025 were active with the notes climbing alongside stock after earnings bested expectations.

The 0.125% convertible notes rose 4 to 5 points outright with stock up almost 9% early in the session.

They were changing hands at 117.5 in the late afternoon.

There was $14 million in reported volume.

Zscaler’s stock traded to a low of $140.16 and a high of $147.58 before closing at $142.39, up 5.4%.

Stock was on the rise after the cyber-security company posted strong earnings.

The company reported earnings per share of 48 cents versus analyst expectations for earnings per share of 43 cents.

Revenue was $418.8 million versus analyst expectations for earnings of $411.56 million.

Airlines active

It was an active day for the convertible notes of airlines with the sector rising on upwardly revised earnings forecasts.

American Airlines’ 6.5% convertible notes due 2025 gained about 0.75 point outright with stock up about 1.5%.

The notes were trading at 116.75 in the late afternoon.

There was $12 million in reported volume.

American Airlines’ stock traded to a low of $14.64 and a high of $15.07 before closing at $14.87 for a 1.16% increase.

American Airlines’ stock has made strong gains over the past three sessions after it raised its forward guidance due to strong demand.

The airline is now expecting earnings per share of $1.45 to $1.65 in the second quarter, up from the previous EPS estimate of $1.20 to $1.40 and well above analyst expectations for an EPS of $1.29.

Southwest Airlines’ 1.25% convertibles due 2025 were also on the rise on a rosy earnings forecast.

The 1.25% notes gained 2 points outright with stock up more than 3%.

They were trading at 107.75 in the late afternoon.

There was $11 million in reported volume.

Southwest Airlines’ stock traded to a low of $29.33 and a high of $30.64 before closing at $30.07, an increase of 3.28%.

Stock powered higher after the airline joined industry peers in upwardly revising its second-quarter guidance.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

MongoDB Inc. Nasdaq: MDB

Southwest Airlines Co. NYSE: LUV

Zscaler Inc. Nasdaq: ZS

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