Salesforce adds on hedge post earnings; Citrix flat; market eyes Jackson Hole comments

By Rebecca Melvin

New York, Aug. 22 – Salesforce.com Inc.’s 0.25% convertibles traded up on an outright basis on Friday, and improved on a dollar-neutral, or hedged, basis after the San Francisco-based developer of cloud computing business applications reported a wider-than-expected quarterly loss but provided positive forward guidance.

Citrix Systems Inc.’s convertibles traded in line with shares of the Fort Lauderdale, Fla.-based cloud computing company that rose but then pulled back following remarks by Federal Reserve chairman Janet Yellen at the Jackson Hole, Wyoming, economy and monetary policy conference. Citrix shares ended unchanged.

“Citrix traded, but it was not a big move one way or the other,” a New York-based trader said.

Elsewhere, Priceline Group Inc. and Illumina Inc. were trading actively again in an extension of a week-long trend.

Priceline’s newer $1 billion of convertibles, which priced a week ago, looked a little weaker, changing hands at 98.4 with shares edging upward. But Priceline’s older 1% convertibles due 2018 were up 0.5 point at 145.7 at midafternoon, according to Trace data.

Otherwise, the convertibles market was described as listless with no catalysts for trading.

“Everyone is concentrating on Jackson Hole comments that are going to affect the whole market,” a Midwestern-based trader said.

At the Federal Reserve’s Jackson Hole conference, Yellen’s comments struck a more hawkish tone than some were expecting. She said the labor market remains hampered by the effects of the 2008 financial crisis and following recession, and therefore, the Federal Reserve should move cautiously in determining when interest rates should rise.

But Yellen also said that with the economy shifting closer to its targets, the Fed’s emphasis is also shifting toward questions about how quickly job market slack is likely to be taken up and how fast to dismantle accommodation. European Central Bank president Mario Draghi also spoke at the conference.

Equities were mixed to lower, with the Dow Jones industrial average and S&P 500 stock index off slightly, but the Nasdaq stock market in positive territory. The 10-year Treasury rose, pushing the yield down 8/32 to 2.44% early Friday.

Salesforce improves on hedge

Saleforce.com’s 0.25% convertibles due 2018 traded up about 4 points to 116 on an outright basis and expanded on a dollar-neutral, or hedged, basis by about 0.5 point, assuming a delta of about 55% going into the session, a trader said.

The Salesforce convertibles were up 0.5 point, using a 55% delta with the underlying shares up about 7%, the trader said.

The bonds were also cited lower at 113.5 with the underlying shares at $57.00. But with the stock at $59.70, which is near the stock’s closing price level, the bonds changed hands at 116 with the shares up at $59.70. On Thursday they were at 111.75 versus a share price of $55.00, a trader said.

“The bonds are doing a little better,” a trader said.

A second trader said, “There was an outright guy around.”

About $1 billion of the Salesforce bonds priced in March 2013. They had a premium of 47% at issue, while a call spread boosted the premium from the issuer’s perspective to 200%.

Salesforce also has an older convertible, the 0.75% convertible due 2015, that didn’t appear to trade.

Meanwhile, Workday Inc.’s 1.5% convertibles due 2020 traded on Friday at levels that were off about 0.25 point from Thursday at 130.25 with shares of the Pleasanton, Calif.-based cloud-based human resources company up 61 cents, or 0.7%, at $88.42.

Mentioned in this article:

Citrix Inc. Nasdaq: CTXS

Illumina Inc. Nasdaq: ILMN

Priceline Group Inc. Nasdaq: PCLN

Salesforce.com Inc. NYSE: CRM

Workday Inc. Nasdaq: WDAY

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.