Snap, Twitter convertible notes down outright, up on swap; Beyond Meat under pressure

By Abigail W. Adams

Portland, Me., Oct. 22 – The convertibles primary market marked its third week with no new deal activity on Friday.

However, there are deals in the pipeline with some new paper expected in the coming week.

Meanwhile, there was an uptick of activity in the convertibles secondary space on Friday as earnings-related volatility hit outstanding issues.

Equity markets were mixed with tech and growth stocks the underperformers after a nearly week-long rally that saw the S&P 500 index notch a fresh record.

The Dow Jones industrial average closed the day up 74 points, or 0.21%, while the S&P 500 index closed the day down 0.11%, the Nasdaq Composite closed down 0.82% and the Russell 2000 index closed down 0.21%.

Snap Inc.’s 0% convertible notes due 2027 were in focus in the secondary space with the notes down outright but making large gains dollar-neutral as stock dropped double-digits on the heels of a disappointing earnings report.

Twitter Inc.’s 0.25% convertible notes due 2024 also traded off outright but gained dollar-neutral as the company’s stock traded down with its sector peer.

Beyond Meat Inc.’s already struggling 0% convertible notes due 2027 were pummeled further as stock tanked after the plant-based food company slashed its third-quarter revenue guidance prior to its earnings report.

Social media in focus

The equity of social media companies was under pressure on Friday after Snap reported disappointing earnings and issued dire warnings about the impact of Apple iPhone’s new privacy policy and supply chain bottlenecks.

Snap’s 0% convertible notes, which were also active on Thursday in the run-up to earnings, dominated activity in the secondary space with the notes down 12 points outright as stock tanked more than 20%.

However, the notes expanded on the move down.

The notes gained 1.5 to 2 points on swap, a source said.

The 0% convertible notes were changing hands at 106.25 early in Friday’s session. They were trading at 105 in the late afternoon.

Snap reported mixed earnings after the market close on Thursday.

Snap’s stock traded to a high of $60.78 and a low of $55.03 before closing the day at $55.14, a decrease of 26.59%.

Snap reported earnings per share of 17 cents versus analyst expectations for earnings of 8 cents.

However, revenue was $1.07 billion versus analyst expectations for earnings of $1.10 billion.

The company’s warning about the impact of the Apple iPhone’s new privacy policy rattled investors and drove down its sector peers.

Twitter, a fellow convertible issuer, saw its company’s stock dragged down following Snap’s earnings.

The 0.25% convertible notes shaved off about 2.5 points outright with stock off almost 5%.

They were changing hands at 129.5 in the late afternoon.

However, the notes also gained on the move down and expanded about 0.5 point dollar-neutral, a source said.

Twitter’s stock traded to a high of $64.47 and a low of $62.09 before closing the day at $62.24, a decrease of 4.83%.

Beyond Meat under pressure

Beyond Meat’s 0% convertible notes were under pressure in high-volume activity on Friday as the company’s stock tanked double-digits.

The 0% notes dropped about 4 points outright with stock down 13%.

The 0% notes were changing hands at 83.5 early in Friday’s session. They continued to trade on an 83-handle as the session progressed.

The notes contracted 0.75 point to 1 point on the move down on a hypothetical delta of 60%, a source said.

However, market players that had the notes on a heavier hedge most likely profited dollar-neutral from the move, the source said.

Beyond Meat’s stock hit a 52-week low during Friday’s session. Stock traded to a low of $91.55 and a high of $97.50 before closing the day at $95.80, a decrease of 11.8%.

Stock tanked after the company lowered its third-quarter revenue guidance to $106 million from the previous $120 million to $140 million.

The company is slated to report earnings on Nov. 10.

Mentioned in this article:

Beyond Meat Inc. Nasdaq; BYND

Snap Inc. NYSE: SNAP

Twitter Inc. NYSE: TWTR

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