Ceridian convertibles in focus; Workday active as maturity approaches; Upstart trades

By Abigail W. Adams

Portland, Me., May 23 – It was a quiet start to the week in the convertibles secondary space on a strong day for equity markets.

While sources questioned whether indexes would stay positive for the duration of Monday’s session, they held onto their gains.

The Dow Jones industrial average closed Monday up 618 points, or 1.98%, the S&P 500 index closed up 1.86%, the Nasdaq Composite index closed up 1.59% and the Russell 2000 index closed up 1.10%.

While there were some buyers in the space during Monday’s session, convertibles trading activity was thin with few notable movements in the names that did trade, sources said.

There was $41 million of convertibles trading on the tape about one hour into the session and $319 million on the tape about one hour before the market close, sources said.

Ceridian HCM Holding Inc.’s 0.25% convertible notes due 2026 were among the top traded names during Monday’s session.

Workday Inc.’s 0.25% convertible notes due Oct. 22, 2022 continued to see high volume activity as the maturity of the notes fast approaches.

Upstart Holdings Inc.’s 0.25% convertible notes due 2026 also remained active as stock gave back its gains from a strong rally the previous week.

Ceridian active

Ceridian’s 0.25% convertible notes due 2026 were among the top traded issues of Monday’s session on a volatile day for the company’s stock.

The 0.25% convertible notes were changing hands at 83.625 versus a stock price of $56.29 in the late afternoon.

The yield on the notes was 5%.

There was $13 million in reported volume.

Ceridian’s stock wavered between gains and losses before closing in the red.

Stock traded to a low of $55.16 and a high of $57.29 before closing the day at $56.12, a decrease of 0.85%.

The human resources software company’s 0.25% convertible notes were little changed on an outright basis on Monday with the notes remaining on an 83-handle.

However, they have held onto their gains after hitting an all-time low of 79.875 on May 12.

Workday eyed

Workday’s 0.25% convertible notes due Oct. 22, 2022 continued to see high-volume activity as the maturity of the notes fast approaches.

The 0.25% convertible notes were changing hands at 118.5 early in the session.

They traded at 118.25 versus a stock price of $164.76 in the late afternoon.

There was $11 million in reported volume.

Workday’s stock traded to a high of $167.17 and a low of $162.70 before closing the day at $165.79, a decrease of 0.12%.

The notes were trading at about an 8-point premium to parity, a source said.

Despite the short time left for the notes, they still carried lots of optionality to the upside and downside, a source said.

While the notes carry a call option with the possibility of making money to the upside, the premium on the notes will dissipate quickly as their maturity approaches.

However, “they do have put optionality,” a source said, with the downside protection of par.

Market players stand to receive a healthy return if they play the notes on a heavy hedge and stock collapses prior to their maturity, the source said.

Upstart holds

Upstart’s 0.25% convertible notes due 2026 remained active in the secondary space with stock range bound after a strong rally the previous week.

The 0.25% convertible notes were flat on an outright basis. They were trading at 59 versus a stock price of $41.65 in the late afternoon.

The yield on the notes was 13.25%.

There was $9 million in reported volume.

Upstart’s stock traded to a high of $45.10 and a low of $41.04 before closing the day at $41.95, a decrease of 6.15%.

Stock was giving back its gains after a strong rally the previous week pushed it up to $54.

The convertible notes traded up to a 61-handle as stock rallied following a brutal post-earnings sell-off, which drove stock down to a 52-week low of $25.43 and drove the convertible notes down to a 56-handle.

Mentioned in this article:

Ceridian HCM Holding Inc. NYSE: CDAY

Upstart Holdings Inc. Nasdaq: UPST

Workday Inc. Nasdaq: WDAY

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