Morning Commentary: Coupa convertibles active amid stock plunge; Sea, Splunk move lower

By Rebecca Melvin

Concord, N.H., March 15 – Coupa Software Inc.’s 0.125% convertible notes due 2025 were plunging with the underlying shares early Tuesday after the San Mateo, Calif.-based cloud platform business lowered guidance post market close on Monday.

The Coupa convertibles were seen trading last at 86.81, which was down from about par previously, on $27.5 million of bonds volume, according to Trace data. Volume in Coupa alone accounted for about 10% of the convertible market’s overall reported volume for the day so far.

Shares of the cloud platform for business spend management were down about 17%. The shares tanked after the company provided a forecast for 2023 that widely missed estimates. Its fiscal fourth-quarter results were better than expected, however.

Coupa priced $700 million of the convertibles with an initial conversion premium of 35% in June 2019.

Volume for the day so far was unexpectedly hefty and downwardly biased as the Federal Reserve policy setting meeting got underway in Washington, D.C. on Tuesday. The current Federal Funds rate is 0% to 0.25%, where it was lowered to at the beginning of the pandemic.

A rate hiking cycle is widely expected to kick off on Wednesday at the conclusion of the Fed meeting, but the markets expect the smallest increment of an increase given recent market volatility and uncertainty stemming from Russia’s invasion of Ukraine, related commodity and energy market gyrations and Covid-19 lockdowns in China.

Other convertibles in trade on Tuesday so far were Singapore e-commerce behemoth Sea Ltd.’s 0.25% convertible notes due 2025, which continued a downward move alongside its equity, and Splunk Inc.’s 1.125% convertible notes due 2025, which were down another 0.5 point despite a rebound in shares.

On Monday, the Splunk convertibles were down outright but expanded on a dollar-neutral basis as stock dropped alongside broader markets.

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