Convertibles little changed; LinkedIn trades in line; tech stays in focus; solar shares up

By Rebecca Melvin

New York, Feb. 2 – Convertibles were mostly flat, or in line with their underlying shares, in quiet trading on Monday, with some follow-through action in a few of the larger, better-quality technology names that were in focus last week, sources said.

LinkedIn Corp.’s convertibles were slightly lower on an outright basis but in line on a hedged basis. Shares were weak in the early going but rallied back into the close along with the broader equity markets. LinkedIn shares ended 0.1% lower on the day.

Last week, outright players were looking to buy quasi, investment-grade technology paper, including that of LinkedIn, Yahoo! Inc., Red Hat Inc. and SanDisk Corp., among others, a New York-based trader said.

On Monday, Yahoo! was trading as well as LinkedIn, but the overall convertibles market was mostly quiet, sources said.

Rough winter weather may have dampened some market participation, but the convertibles market’s hushed tone was not out of the ordinary for a Monday, several sources said.

“Certainly weather could be a factor, with the snow in Chicago and Boston, and it’s slushy here,” a New York-based sellsider said.

The broader markets bounced off early lows, sending crude oil and the S&P 500 stock index into positive territory by late morning and then meaningfully higher by the close. The S&P 500 closed up 25.86 points, or 1.3%, at 2,020.85, and West Texas intermediate crude oil for March delivery closed up $1.50, or 3%, to $49.74, after touching a low of $46.67 intraday.

Looking ahead, traders said earnings will remain a focus of the week, with LinkedIn and Twitter Inc. among companies posting results later in the week.

Twitter was not heard in trade on Monday, but the Twitter A series convertibles were last seen at 90.5 and the Twitter B convertibles were seen at 90, a trader said.

Twitter has held in well on a hedged basis as shares fell last week, a trader said.

“They have richened up a lot, and been one of the best performing tech converts. We’ll see, with earnings, if that will be a catalyst,” the trader said.

Elsewhere, a handful of solar shares were up strongly on the day, SunPower Corp. shares gained 7% to $25.76. But those convertibles were not heard in trade.

Also higher was SolarCity Corp. Shares of the San Mateo, Calif.-based provider of solar energy systems including residential rooftop systems jumped $4.11, or 8.5%, to $52.72.

There were outright buyers of the SolarCity 1.625% convertibles, which changed hands at 88, according to market sources.

LinkedIn trades in line

LinkedIn’s 0.5% convertible senior notes due 2019 were seen at 104.75 bid, 105.25 offered with the underlying shares at $222.00, a New York-based trader said.

LinkedIn shares traded down to $219.16 in the early going but closed at $224.57, which was down only 17 cents, or 0.1%.

That was down from about 106 on an outright basis from last week, but in line on a hedged basis.

“The stock was a little higher [last week], and it nuked straight down,” the trader said of the LinkedIn bonds.

The Mountain View, Calif.-based business-oriented social networking service priced $1.32 billion of the 0.5% senior notes in the first half of November.

LinkedIn was among a variety of technology names that continue to be active, a trader said. He pointed to earnings this week providing a further catalyst to trade.

Yahoo!’s 0% convertibles traded at 108.6 last, with the underlying shares at $44.69, which compared to 108 versus $43.73 on Friday.

Mentioned in this article:

LinkedIn Inc. Nasdaq: LNKD

Red Hat Inc. NYSE: RHT

SanDisk Corp. Nasdaq: SNDK

SolarCity Corp. Nasdaq: SCTY

SunPower Corp. Nasdaq: SPWR

Twitter Inc. Nasdaq: TWTR

Yahoo! Inc. Nasdaq: YHOO

© 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.