Semtech’s new convertibles fall along with broader semiconductor market; tech names off

Chicago, Oct. 7 – Semiconductor company stock generally had a challenging day as the White House targeted the Chinese semiconductor market, aiming to better the U.S. industry and protect national security.

Many semiconductor names were impacted, even if they were not based in China, as news spread that changes were afoot.

Friday was a down day, but the week was overall positive for two of the major indices.

The S&P 500 index was 0.83% higher over the past five days and the Dow Jones industrial average was up 1.53%. The Nasdaq Composite index was nearly flat, but actually down 0.06% as Friday ended. As semiconductor manufacturers struggled with software companies on Friday, the numbers made sense as the Nasdaq leans toward information technology companies.

AMD set in motion

Semiconductor companies were swiped at by the U.S. executive branch on Friday as the Chips Implementation Steering Council met on Thursday in an inaugural meeting to work on making America more competitive in the semiconductor industry and in the interest of national security.

However, the whole sector took a tumble.

Santa Clara, Calif.-based Advanced Micro Devices, Inc. fell 13.16% in the stock market as of late Friday afternoon.

The company’s 4.393% convertible bonds due 2052, which do not trade every day, were changing hands much more frequently than usual on Friday, trading back to roughly where they started the week at 84.95 after the Monday/Tuesday rally had lifted them to a temporary height on an 87-handle.

The company’s stock suffered, hard hit at negative 13.87%, or $58.44, as the week wrapped.

Semtech falls on debut

Semtech Corp. bonds spent their debut day in the secondary market struggling to hold onto par.

A couple of pre-lunch trades tried to give them a premium, but ultimately as the morning wore on and then into the early afternoon, the notes gave way and ended up on their first full day on a high 97-handle, moving at around 97.72 bid in the early afternoon as activity subsided on the fresh paper.

The semiconductor supplier had perfect timing for pricing its bonds, before the semiconductor sector was broadly hit, but the company’s stock caught the sector punch and shares ended the day 6.84% lower.

The company’s stock dropped a separate 8.74% on Thursday, as a kneejerk reaction to the new bonds.

DexCom shines

San Diego-based DexCom, Inc. trended skyward on Friday as Medicare updated its coverage for glucose monitoring, squarely in DexCom’s wheelhouse and positive news for the company.

DexCom’s two outstanding convertible bonds were just starting to move on the early Friday morning tape, responding to the good news.

The more active of the two bonds, the 0.25% convertibles due 2025, leapt around 3.5 points in the first trade on the board.

The first trade broke par, 100.62, the first time above 100 since May.

As the day progressed, the bonds strengthened, marked at 100.93 at day’s end in the more weighted trades near the close.

Generally less active, DexCom’s 0.75% bonds due 2023 zipped up 28 points in the early going, hitting 252.28 bid, a jump to a level also not seen since May.

That level retreated, but not much, falling back to 251.07 bid in the midafternoon.

The 0.25% bonds priced in May 2020 against a stock price of $421.36, listing a 42.5% initial conversion premium.

The 0.75% bonds were sold in 2018 with a $123.99 stock price and a 32.5% initial conversion premium.

The diabetes management company’s stock was up 7.28% on the day, settling at $102.14.

The five-day trend on the stock is that it left the week 25.37% better than where it started.

Splunk eyed

Splunk Inc.’s convertible bonds continued momentum from earlier in the week on Friday.

The company’s 0.5% convertibles, which mature in a year, fell consistently below 96 in active trading. They were seen at 95.74 bid late in the day. They were marked at 96.22 at Thursday’s close, near where they ended on Wednesday at 96.12 and on Tuesday at 96.44.

The 1.125% convertibles due 2025 were worse for the wear, 0.5 lower at the end of the day. They were seen at 89.85 at noon ET and closed the day around there at 89.37 as the trains were boarding for the weekend. They were seen at 90.42 bid late on Thursday.

The 1.125% convertible bonds due 2027 were also stepping back 0.5 point. They ended Friday at around 79.37, but finished Thursday at 79.9.

Software company Splunk’s stock was off 8.24% on Friday, closing the day at $72.98 per share. The company was down 3.26% on the week.

Okta active

Still on California-based software companies, Okta, Inc. also was active on Friday.

The company’s 0.375% bonds due 2026 were actually flat to better at the end of the week, last trading at 79.37.

They started the week at 77.08.

The bonds bucked the trend of following the company’s stock, which ended the week lower by 6.57%.

DraftKings edges higher

The volume was less than staggering, but DraftKings Inc. was on the tape on Friday, and the zero-coupon bonds due 2028 were better for the trading activity.

The notes went out a touch stronger, last seen at 66.81.

The convertibles were offered in March.

They have traded in a sweeping range but lately have been steady in the 64 to 70 zone.

The name is one to watch in the weeks ahead, though.

Year to date, the company’s stock is off by 40.33%. However, most of the storm was over by May. Since May, the stock has been stable or better. The last six months have the stock better by 1.16%.

Several news outlets on Friday, though, had it that the sports betting company was nearing a partnership deal with ESPN that could be a gamechanger.

Twitter focus fades

Twitter Inc.’s 0.25% convertible bonds due 2024 were fading into the background the last few hours of the week.

They continued to back off the initial Tuesday jump which saw them catapult up around 9 points.

The bonds had given back around 2 points of that to end the week at 107.38.

Twitter’s stock was off on Friday but left the week up 12.18%. The closing price was $49.18.

Mentioned in this article:

DexCom, Inc. Nasdaq: DXCM

DraftKings Inc. Nasdaq: DKNG

Okta, Inc. Nasdaq: OKTA

Semtech Corp. Nasdaq: SMTC

Splunk Inc. Nasdaq: SPLK

Twitter Inc. NYSE: TWTR

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