Redwood Trust convertible notes eyed; Snap lifted; ConMed slows; Okta trades lower

Chicago, June 6 – The convertible bond market was waiting Monday evening for one deal to price for fresh supply from real estate name Redwood Trust, Inc.

Topical news did little to move the convertible bonds of Twitter Inc. as bond investors generally shrugged off more news that Elon Musk was wavering on his acquisition of the company. Volume was not notable after a full day of trading.

However, related social media company Snap Inc.’s bonds caught an updraft on a positive analyst rating after challenges the last few weeks.

New paper priced last week from ConMed Corp. was changing hands at a reduced pace on Monday, although it was still in motion.

And, Okta Inc., which had benefitted from a recent positive earnings report, fell back to earth as the enthusiasm waned.

Redwood Trust on tap

The convertible bond primary market started with a fresh deal announcement, even with the deal relatively diminutive in size at an announced $150 million.

The company was marketing a Rule 144A transaction on Monday with the bonds expected to price after the market close.

Deal terms were not yet available in the early evening.

The company’s stock took a hit with the news and fell nearly 10% on a day when equity indexes were in the green.

In the May 31 week, the company’s existing 5.625% convertible notes due July 15, 2024 had moved in a range of 96 to 98.75, slowly shifting up over the four days in a holiday-abbreviated week.

Initially, the announcement of a new issue did little to change the price of the existing convertibles on Monday morning.

They managed to hold above 98 for the first few trades on Monday, but in light trading action the bonds fell to 92 and ended the afternoon a tad above 94, falling 4½ points on an outright basis from start to finish over the day.

Snap starts to snap back

Convertibles from social media company Snap have started moving above par again and ticked higher on Monday as the company received an outperform rating from Credit Suisse and a $59 target price for the company’s stock.

Trading prices on the company’s convertibles swiftly fell two weeks ago when the company’s chief executive officer announced it would miss revenue and earnings targets.

The 0.75% convertible notes due 2026 sank 30 points outright on the news.

However, the bonds ticked above par in the June 1 week and have been inching higher, closing Monday just shy of 103, rising throughout the day.

Less active, but with a few sizable trades on the tape on Monday, the company’s 0.125% convertibles due March 1, 2028 were generally in line with recent trading prices, trading at around 74 near the close on Monday.

Snap’s stock was a volume mover on Monday, with shares closing the day up 4.63% at $15.15 per share.

ConMed slows

ConMed’s new convertible bonds are finding longer term owners as trading slows on the new $700 million issue from last week.

The 2.25% notes were yielding around 1.9% as they came in to the 101.5 range on an outright basis after hitting the secondary market and doing well – hitting highs in the 104s and even broaching 105 during their first week in the market.

Word has yet to surface on whether there will be another $100 million of the issue should the greenshoe be exercised.

ConMed’s stock was nearly flat on Monday, dropping 21 cents to $110.85 per share.

Okta falls after surge

Software company Okta’s convertibles gave up most of their gains from a Friday rally after an earnings beat was announced.

Okta’s 0.375% convertible notes due 2026 jumped 4 points to 87 outright on Friday, with enthusiasm waning late in the day to around 86.

However, the bonds lost their luster further on Monday and sank back a bit with each successive Monday trade to end the day just below 85.

Similarly, Okta’s 0.125% bonds due 2025 were looking a bit weaker on Monday.

The notes jumped 1.25 points outright and hit 94.5 and then relaxed to 98 on Friday afternoon.

On Monday, the excitement had dissipated and the notes were holding between 92.25 and 92.75.

The company’s stock fell roughly in line with the bond prices, jumping on Friday morning and then slowly tapering off since the initial jump, closing down 3.44% on Monday at $95 per share.

Mentioned in this article:

ConMed Corp. NYSE: CNMD

Okta Inc. Nasdaq: OKTA

Redwood Trust, Inc. NYSE: RWT

Snap Inc. NYSE: SNAP

Twitter Inc. NYSE: TWTR

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