Morning Commentary: Western Asset prices cheap; DexCom steals the show as convertibles drop

By Stephanie N. Rotondo

Seattle, Sept. 28 – Yet another new issue entered the convertible bond market on Thursday, as Western Asset Mortgage Capital Corp. priced $100 million of 6.75% convertible senior notes due 2022.

The deal came with an initial conversion premium of 10%, on the cheap end of price talk. The yield also came at the cheap end of the 6.25% to 6.75% yield talk.

JMP Securities ran the books.

But while the company’s equity (NYSE: WMC) was drifting lower in the wake of the new deal – it was off over 1% at mid-morning – the issue wasn’t getting nearly the attention that other recent deals have. Instead, the market seemed to shift its focus to DexCom Inc.’s 0.75% convertible notes due 2022, which were seen down about 13 points at mid-morning.

A market source pegged the paper around 86.5.

The underlying equity (Nasdaq: DXCM) was meantime down over 36%.

The weakness in the name came as the Food and Drug Administration approved a device created by competitor Abbott that detects blood sugar levels without a finger-prick. The device instead uses a sensor that sticks to the body.

DexCom is reportedly working on a similar device, but it is not expected to enter the market until sometime in 2018.

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