Morning Commentary: Semtech enters convertibles primary; Splunk retreats

Chicago, Oct. 6 – The convertibles primary market caught its first break in three weeks when Semtech Corp. announced a proposed Rule 144A offering of convertible senior notes with a five-year tenor on Thursday morning.

The $250 million acquisition bonds will come with a 13-day greenshoe for another $37.5 million.

The company’s acquisition of Sierra Wireless, Inc. is expected before March 3. If the acquisition fails to close on time, the company will have the option for a special redemption at 101.

Splunk falls

In the secondary market, a Thursday volume mover was starting the day in the red.

Splunk Inc.’s convertible bonds were propelled into action on an analyst downgrade.

The San Francisco-based software company has three convertible bonds; they were each off about 0.25 to 0.5 point. They were all active in morning trading.

The company’s 0.5% convertibles, which mature one year from now, were marked at 98.89.

The 1.125% convertibles due 2025 were noted at 90.2 bid. The bonds traded to their lowest level last week, on an 88-handle.

The 1.125% convertible bonds due 2027 were on the tape, sighted at 79.76, but were less active than the company’s other notes.

Splunk’s stock was off 5% on Thursday morning, trading at $79.19 per share. The company’s stock has not been this low since December 2017.

Twitter in focus

The biggest name from Wednesday was getting a slow start on Thursday morning.

Twitter Inc.’s 0.25% convertible bonds due 2024 were in modest retreat late in the morning.

Still at levels not seen since the spring, the microblogging company’s bonds were down by 0.5 to 1 point from late Wednesday afternoon trades.

A source noted on Thursday morning that Apollo and Sixth Street had pulled their interest in the deal some time ago when Elon Musk started to walk away.

Twitter’s stock was edging down, 0.45% lower, seen at $51.08 before lunch.

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