By Abigail W. Adams
Portland, Me., Nov. 27 – Square Inc.’s 0.375% convertible notes due 2022 tumbled alongside its stock in trading Monday after reaching record heights in recent weeks.
The company’s convertible notes and stocks soared earlier in the month after a positive third quarter earnings report and an announcement the company would experiment with the crypto-currency Bitcoin.
Analysts now warn of a pending pullback.
The convertible space continued to be quiet in the post-Thanksgiving season with about $238 million trading hands in the secondary market by late afternoon, according to a market source.
However, health care companies were active participants. Convertible notes from Quidel Corp. and Teva Pharmaceutical Finance Co. saw some action as both companies’ stocks experienced abnormally high trading volume in response to company news.
Quidel Monday announced a pending lawsuit from customer Beckman Coulter while Teva unveiled a massive reorganization of its management structure.
Convertible notes from Horizon Pharma plc and Hologic Inc. also saw some activity during the session.
Square’s downward spiral
Square saw large fluctuations in trading prices for its 0.375% convertible notes due 2022 with a low of 183.702 and high of 215.819 throughout the session before closing the day at 190.392, according to Trace data.
The closing trade was a 25 point drop from Friday’s close and a fast fall for convertible notes that have seen a steady upward climb throughout November. Square stock also took a dive Monday, closing the day at $41.02, a decrease of 16.05%.
The company’s stock and convertible notes soared throughout November as investors responded to positive third quarter earnings, raised future guidance and hype surrounding the company’s announced foray into Bitcoin trading.
BTIG on Monday downgraded Square’s stock to sell with a $30 price target. Analyst Mark Palmer cited risks associated with Bitcoin, in addition to increased competition, as factors for the downgrade.
Abnormal trading volume
Quidel’s and Teva’s convertible notes were both busy as the equities were active on news.
Teva’s 0.25% convertible notes due 2026 saw active trading with little fluctuation in price after the beleaguered pharmaceutical company announced a restructuring of its top management.
The notes traded between a high of 86.37 and low of 85.4 before closing the day at 86. Teva stock closed the day at $14.65, an increase of 6.93%. Nearly 40 million shares changed hands in contrast to the average daily volume of 25 million.
Teva announced that it would combine its generic and specialty medicine global units into a single commercial organization operating in three regions.
Research and development will also be melded into a single global group responsible for both generic and specialty medications, according to a company announcement.
Three top executives will retire as a result of the reorganization. Teva has long struggled with declining revenue and large debt. In mid-November Fitch Ratings lowered the company’s credit status to junk.
Quidel saw an 8 point drop in its 3.25% convertible notes due 2020 during Monday’s session after large swings in trading prices. The notes were trading between a low of 128.9 and a high of 139.51 before closing the day at 133.606.
The convertible note moved in tandem with company stock which ended the day at $36.32, a decrease of 9%.
The volume of company stock trading hands exploded during Monday’s session to 2.77 million shares as compared to the average daily volume of 445,600.
The California-based maker of diagnostic health care equipment announced client Beckman Coulter would pursue legal action against the company to allow it to sell a molecular diagnostic assay directly to the public.
Quidel has rejected recent offers from Beckman’s parent company to acquire the diagnostic assay in question, according to a company release.
Quidel believes the claims in the litigation are baseless and “merely a tool in an effort to purchase the BNP assay business from Quidel,” according to the company release.
Health care sector active
Hologic’s 2% convertible notes due 2042 saw some action during the session with the note trading about 2 points below parity. The diagnostic products, medical imaging systems, and surgical products company’s convertibles were trading at 132.98 mid-afternoon, as the stock traded at $40.56, according to a market source.
The 2% convertible notes saw about a 2 point drop during Monday’s session from their last previous trade on Nov. 22, according to Trace data.
Hologic stock closed Monday at $40.76, a decrease of 0.27%. Analysts have assigned a price target of $45.14 for the stock, leaving it plenty of room to grow.
Hologic announced Monday that it signed a development and distribution agreement with Clarius Mobile Health for its wireless, handheld ultrasound scanner for breast cancer screening.
Horizon Pharma also saw some trading activity during Monday’s session with the company’s 2.5% convertible notes due 2022 trading at 92.053 mid-afternoon. The notes changed hands six times during Monday’s session in an uptick of activity.
The notes have been dormant since Nov. 21, according to Trace data. Horizon stock closed on Monday at $13.57, a decrease of 1.45%.
Mentioned in this article:
| Square Inc.: | NYSE: SQ
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| Quidel Corp. | Nasdaq: QDEL
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| Teva Pharmaceutical Industries Ltd.: | NYSE: TEVA
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| Hologic Inc.: | Nasdaq: HOLX
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| Horizon Pharma plc: | Nasdaq: HZNP
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