Palo Alto Networks shines in convertible bond space after stock split, buyback news

Chicago, Aug. 23 – Trading volume on Tuesday in the convertible bond space stood at $565 million on a late-summer Tuesday pre-Labor Day.

In terms of outperforming the market, by noon ET the day belonged to Palo Alto Networks Inc. and the afternoon only cemented what was a robust start after a smashing, beating-expectations earnings report for the cybersecurity company out of California.

The airline everyone “luvs” to fly controlled the airspace once again, as Southwest Airlines Co.’s popular issue once again stole the tape in terms of volume.

Topical news brought traders back to Twitter Inc., and Royal Caribbean Cruises Ltd.’s notes had some activity on reasonably quiet seas for the company’s stock.

Palo Alto

Palo Alto Networks’ 0.75% convertible notes due 2023 continued to zip up a few more points throughout Tuesday after a sizable leap early in the morning.

The notes closed Monday around 192.

In the early going before lunch on Tuesday the notes ratcheted up 17 to 18 points.

Trading peaked above 214 in the late afternoon, around 22 points higher on the day.

The company’s stock was a key gainer on Tuesday, ending the day more than 12% higher, closing at $569.51.

The conversion ratio on the bonds is 3.7545, putting the bond price roughly in line with where the stock was trading.

The company’s 0.375% convertibles due 2025 were also ticking higher, again around 20 to 22 points better than where they closed on Monday.

With a 3.3602 conversion ratio, the bonds nearly hit 195 before being marked closer to 194½ in the last few trades.

Palo Alto announced a three-for-one stock split and increased its share repurchase program an additional $915 million, to $1 billion, through Dec. 31, 2023, the company announced in its earnings press release.

Twitter bots

Topical news for Twitter sent the company’s stock down 7.32% on the day, to land at $39.86.

Elon Musk seemingly earned some ground in his fight to walk away from his takeover bid for the company.

Even outside of the Musk court battle, the stock would have likely had an off day after a whistleblower cited security issues and bots on the microblogging platform, should this information have come to light in any context.

However, even though the company’s convertible bonds were in play again on mid-to-light volume, they were reasonably stable.

The 0% convertibles had been trading over the past week in a range of 90 to 93½ and then were moving in the 92 area throughout the day.

Southwest Airlines

Still stealing the show from a volume standpoint, once again Southwest Airlines’ 1.25% convertibles due 2025 came out on top.

The bonds ended the day up less than 1 point, but more than $12 million of the notes were in play, a market source said.

The stock was completely flat on Tuesday, with a $37.47 closing price.

Royal Caribbean

Royal Caribbean’s 6% convertible notes due 2028 were still on the tape on Tuesday.

The notes were wrapped around 107 when they went out on Monday.

They used Tuesday to steadily tick up with the last print just shy of 109.

The Miami-based cruise line operator’s stock moved up 3.12% on Tuesday to end the day at $38.96.

Mentioned in this article:

Palo Alto Networks Inc. Nasdaq: PANW

Southwest Airlines Co. NYSE: LUV

Twitter Inc. NYSE: TWTR

Royal Caribbean Group NYSE: RCL

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