Convertibles secondary quiet; FireEye in focus; Splunk down outright, up dollar-neutral

By Abigail W. Adams

Portland, Me., June 3 – It was another quiet day in the convertibles secondary space with few names on the tape as the tech sector again led equity benchmarks lower.

While the Dow Jones industrial average largely flatlined on Thursday, closing the day down 23 points, or 0.07%, the S&P 500 index closed the day down 0.36% and the Nasdaq Composite closed the day down 1.03%.

However, convertible bond trading volume was the lightest it had been all week with $378 million on the tape about one hour before the market close.

With no new paper entering the space, earnings and company news were the driving force of trading activity.

FireEye Inc.’s 0.875% convertible notes due 2024 was the top traded issue of Thursday’s session with the notes down outright but improved dollar-neutral after the cybersecurity company announced it was selling its core products business.

Splunk Inc.’s convertible notes were also taking a hit on an outright basis but gaining dollar-neutral as stock got pummeled following earnings.

While volume in the name was light, Sunnova Energy International Inc.’s 0.25% convertible notes due 2026 were also down outright but improved dollar-neutral with stock under pressure over the last few sessions.

FireEye eyed

FireEye’s 0.875% convertible notes due 2024 were in focus on Thursday after the cybersecurity company announced the sale of its core products business.

The 0.875% notes dropped about 8 points outright as stock fell more than 17%.

They were changing hands at 111.5 in the late afternoon.

While down outright, the notes expanded upwards of 0.5 point dollar-neutral on a 50% delta, a source said.

FireEye’s stock traded to a high of $20.53 and a low of $18.50 before closing the day at $18.56, a decrease of 17.62%.

Stock saw one of its worst single-day declines after the cybersecurity company announced it was selling its core products business and name to private-equity firm Symphony Technology Group for $1.2 billion in cash.

While FireEye’s network, e-mail and endpoint cloud-security products will be part of the sale to Symphony, the company will retain its controls-agnostic software and services and rename itself Mandiant Solutions, the company said in a press release.

The convertible bonds issued by FireEye will stay with Mandiant Solutions, a source said.

FireEye was at the center of the massive hack of SolarWinds software in mid-December that victimized several government agencies and Fortune 500 companies.

Splunk’s earnings

Splunk’s convertible notes were down outright but up dollar-neutral as stock got pummeled following another disappointing earnings report.

Splunk’s 0.5% convertible notes dropped about 4 points outright with stock off more than 9%.

The 0.5% notes were changing hands at 106.5 in the late afternoon.

They expanded about 0.25 point dollar-neutral, a source said.

While less active, Splunk’s 1.125% convertible notes due 2027 dropped about 3 points outright to trade down to 92.

However, the notes were also improved dollar-neutral.

Splunk’s stock traded to a high of $119.18 and a low of $111.67 before closing the day at $111.98, a decrease of 9.54%.

Splunk reported a loss per share of 91 cents versus analyst expectations for a loss of 70 cents.

However, the company beat on the bottom line with revenue of $502.1 million versus analyst expectations for revenue of $491.7 million.

The earnings results were met with several price target cuts from analysts who cited concern about the company’s growth prospects.

Sunnova expands

While volume in the name was light, Sunnova’s 0.25% convertible notes due 2026 were down outright but up dollar-neutral with stock under pressure over the past few sessions.

The notes were down about 3 points outright and were seen changing hands at 101.25 bid, 101.75 offered early in the session.

However, the notes expanded about 0.5 to 0.75 points on the move down, a source said.

Sunnova’s stock traded to a high of $28.48 and a low of $27.16 before closing the day at $27.81, a decrease of 1.63%.

Stock has dropped 4.7% since last Friday due to general weakness in the market, a source said.

Mentioned in this article:

FireEye Inc. Nasdaq: FEYE

Splunk Inc. Nasdaq: SPLK

Sunnova Energy International Inc. NYSE: NOVA

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