JetBlue loses, Spirit Airlines gains on acquisition bid; Twitter active; Affirm pressured

By Abigail W. Adams

Portland, Me., April 6 – The convertibles primary market remained on hold on Wednesday as equities extended declines from Tuesday’s session.

There are deals on the horizon; however, the renewed volatility has once again put a damper on the calendar, sources said.

Selling pressure returned to stocks as markets once again attempt to price in the implications of a simultaneous aggressive rate hike schedule and balance sheet run-off from the Federal Reserve.

The Dow Jones industrial average closed Wednesday down 145 points, or 0.42%, the S&P 500 index closed down 0.97%, the Nasdaq Composite closed down 2.22% and the Russell 2000 index closed down 1.42%.

The 10-year Treasury yield continued its climb to “scary levels,” a source said, reaching as high as 2.66% before settling at 2.6%.

The market was heavy as the Federal Reserve meeting minute notes signaled support for more than one half-point percentage increase in the coming year, in addition to reducing its balance sheets at a maximum pace of $95 billion a month, a significant increase from the previously anticipated $50 billion a month.

While volatility again roiled equity markets, the convertibles secondary space remained quiet.

There was $70 million in reported volume a little more than one hour into Wednesday’s session and $357 on the tape about one hour before the market close.

Topical news remained the main driver of activity in the space.

JetBlue Airways Corp.’s 0.5% convertible notes due 2026 and Spirit Airlines Inc.’s 1% convertible notes due 2026 were active following JetBlue’s acquisition bid for Spirit.

While JetBlue’s 0.5% convertible notes were down on an outright and dollar-neutral basis, Spirit Airlines’ 1% convertible notes gained in active trading.

Twitter Inc.’s 0% convertible notes due 2026 continued to actively trade on Wednesday although with little movement in price.

Affirm Holdings Inc.’s 0% convertible notes due 2026 were again down in active trading with growth stocks and companies that went public through SPAC deals leading losses in equities.

JetBlue + Spirit

JetBlue’s 0.5% convertible notes due 2026 and Spirit Airlines’ 1% convertible notes due 2026 were moving in opposite directions in active trading following JetBlue’s acquisition bid.

JetBlue’s 0.5% convertible notes fell 3.5 points outright with stock off more than 8%.

The notes were changing hands at 87.5 versus a stock price of $12.41 early in the session.

They were changing hands at 87.75 versus a stock price of $12.64 in the late afternoon.

They contracted about 1 point dollar-neutral.

There was $18 million in reported volume.

JetBlue stock traded to a high of $13.07 and a low of $12.33 before closing the day at $12.45, a decrease of 8.72%.

The losses added to Tuesday’s 7% decline.

However, Spirit Airlines’ 1% convertible notes due 2026 jumped in active trading.

The 1% convertible notes rose more than 5 points outright with stock down more than 2%.

The 1% notes traded north of 93 on Wednesday. They were changing hands at 93.875 versus a stock price of $26.33 in the late afternoon.

There was about $8 million in reported volume.

Spirit stock traded to a high of $27.13 and a low of $25.25 before closing the day at $26.27, a decrease of 2.41%.

While Spirit Airlines’ stock was under pressure with broader markets on Wednesday, it has surged more than 20% since news broke on Tuesday about JetBlue’s takeover bid.

JetBlue announced on Tuesday it was bidding $3.6 billion for Spirit Airlines, challenging the Frontier Group Holdings and Spirit Airlines merger agreement.

“They’re going to have to consider it,” a source said.

The deal values Spirit Airlines at $33 a share, a 50% premium over Spirit’s April 4 closing stock price of $21.99 and a $3 premium over Frontier’s offer.

If JetBlue is successful in acquiring Spirit, the takeover clause for Spirit’s 1% convertible notes would be triggered and the notes would get taken out at par, a source said.

The 1% notes would remain outstanding in a merger with Frontier.

While both JetBlue’s and Spirit’s convertible notes were active following the news, there is a great deal of uncertainty about whether either acquisition bid would receive regulatory approval.

“Right now, it’s anyone’s guess,” a source said.

Twitter active

In a carryover from the previous two sessions, Twitter’s 0% convertible notes due 2026 remained active on Wednesday although with little movement in price.

The 0% convertible notes continued to trade on an 88-handle.

They were changing hands at 88.125 versus a stock price of $51.24 in the late afternoon.

There was $10 million in reported volume.

Twitter’s stock traded to a high of $52.87 and a low of $49.30 before closing the day at $50.76, a decrease of 0.43%.

Twitter’s convertible notes dominated the tape during Monday’s and Tuesday’s session following news Tesla Inc. chief executive officer Elon Musk had taken a 9.2% stake in the company and would be joining the board.

Affirm down again

Affirm’s 0% convertible notes due 2026 were again under pressure in active trading with growth stocks taking a hit amid spiking Treasury yields.

The 0% convertible notes fell about 2 points outright.

They were changing hands at 68.375 in the late afternoon.

The yield on the notes was just shy of 8.5%, according to a market source.

Affirm’s stock traded to a high of $42.59 and a low of $38.98 before closing the day at $40.87, a decrease of 6.77%.

The 0% convertible notes leveled off around 70 over the past two weeks after rebounding from an all-time low of 63 in mid-March.

Mentioned in this article:

Affirm Holdings Inc. Nasdaq: AFRM

JetBlue Airways Corp. Nasdaq: JBLU

Spirit Airlines Inc. NYSE: SAVE

Twitter Inc. NYSE: TWTR

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