Convertibles trading light; Palo Alto gains; CalAmp drops; Weatherford, Nabors crushed

By Abigail W. Adams

Portland, Me., Dec. 11 – The volatility in equities has not only ground convertible primary market activity to a halt, but impacted trading volume in the secondary space with Tuesday no exception.

Trading volume was again light as the seesaw in equities continued with little on the tape early in the session and about $242 million by the late afternoon.

Few names saw concentrated trading activity, sources said.

The Dow Jones industrial average opened Tuesday with a nearly 300-point gain, dropped to negative territory in intraday trading, again clawed back to the positive but gave up its gains to close the day down 53 points.

“How do you play this?” a market source said.

Shorter duration convertible notes have been in focus in recent sessions and names trading with a high yield were seen better bid on Tuesday, according to a market source.

The stock of several convertible issuers was stronger on Tuesday with the tech and auto sectors benefitting from news China is moving forward with tariff cuts on imported automobiles.

Palo Alto Networks Inc.’s 0.75% convertible notes due 2023 were benefactors of a positive move in stock with the notes improved on an outright basis in decent trading.

However, CalAmp Corp.’s 2% convertible notes due 2025 saw movement in the opposite direction as stock tanked on Tuesday in response to lower guidance.

The energy sector remained under pressure in the secondary space with Weatherford International Ltd.’s 5.875% convertible notes due 2021 and Nabors Industries Inc.’s 0.75% convertible notes due 2024 continuing to get hammered.

Palo Alto improves

Palo Alto Networks’ 0.75% convertible notes due 2023 were among the volume movers of Tuesday’s session with notes improved outright as stock lifted on Tuesday.

The notes were up about 1 point on an outright basis to trade just south of 98. They were moving largely in line dollar-neutral, sources said.

Palo Alto’s stock jumped as much as 5% early Tuesday as the broader markets rallied. However, stock came in to close the day at $184.42, an increase of 2.89%.

While Palo Alto was among the tech names to see improvement on positive trade talk chatter, news also broke on Tuesday about the expansion of the cyber security company’s contract with Google Cloud.

Goggle’s cloud platform will be used to run Palo Alto’s analytics and automation product, and Google will offer Palo Alto’s RedLock product to its customers, CRN reported.

CalAmp’s guidance

CalAmp’s 2% convertible notes due 2025 traded down as stock hit a new 52-week low after the company cut its third-quarter guidance.

The notes dropped about 6 points outright to 80 in light volume on Tuesday.

CalAmp stock hit a new 52-week low on Tuesday with stock trading down to $13.88 before paring its losses to close the day at $14.18, a decrease of 16.54%.

Stock tanked after the tech company focused on telematics revised its third-quarter guidance after the market close on Monday.

Guidance was reduced to non-GAAP earnings per share of 23 cents from 25 cents. The consensus estimate was for earnings per share of 32 cents.

The company is estimated to report earnings on Dec. 20.

Energy names crushed

Names in the energy sector remained under pressure on Tuesday with the sell-off in crude oil futures continuing to take its toll.

Weatherford’s 5.875% convertible notes due 2021 were volume leaders on Tuesday with more than $11 million on the tape.

The paper continued to trade heavy with most activity in the 68.75 to 69 range, a market source said. The notes continued to trade with a yield of more than 22%.

“They’ve really taken it,” another source said.

Weatherford stock sunk to a new 52-week low on Tuesday after dropping below $1 on Nov. 13. The notes closed Tuesday at 45 cents, a decrease of 2.06%.

The notes have dropped almost 10 points outright in the last month. Prior to the cratering crude oil futures in late October, the 5.875% notes were trading in the low 90s.

While there is not necessarily a direct correlation between crude oil futures and Weatherford’s convertible notes, the $1.27 billion issuance is one of the bellwethers from the oil sector in the convertibles space, a source said.

With crude oil futures cratering, Weatherford stock dropped to pennies with the turnaround plan of the debt straddled company coming into question.

Nabors Industries’ 0.75% convertible notes due 2024 have also seen “real destruction,” a market source said.

The 0.75% notes were trading in the 63 to 63.5 range on Tuesday.

Nabors stock closed Tuesday at $2.88, an increase of 3.97%.

The notes have dropped almost 20% over the last six weeks, a market source said.

They were trading in the 75.5 range at the start of November.

While Nabors stock improved on Tuesday, it has declined about 45% since the energy sector cratered under falling crude oil prices, a source said.

Mentioned in this article:

CalAmp Corp. Nasdaq: CAMP

Nabors Industries Inc. NYSE: NBR

Palo Alto Networks Inc. NYSE: PANW

Weatherford International Ltd. NYSE: WFT

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