Morning Commentary: Holiday weighs on convertibles trading; Twitter falls as bid prospects wane

By Stephanie N. Rotondo

Seattle, Oct. 10 – The Columbus Day trading session was muted in convertibles as the day got underway, according to market sources on Monday.

“It’s been pretty quiet,” one trader said.

Twitter Inc. remained notable, however, after it was reported over the weekend that hopes of a takeover bid were waning.

In early trades, the 0.25% convertible notes due 2019 dropped to 93.5 from previous levels in a 94.5 to 95 context, as the 1% convertible notes due 2021 fell to 91-92 from 93.

The stock (NYSE: TWTR) declined $2.68, or 13.52%, to $17.17 by mid-morning.

On Saturday, Bloomberg reported that the social media company had cancelled a Friday meeting with advisors to discuss any possible bids. It was also reported that possible suitors such as Salesforce.com, Google and Disney were no longer considering making an offer.

Twitter put itself up for sale in September, but has struggled to find a buyer amid concerns surrounding the company’s dwindling user growth and continuing losses. The market has also expressed concern that there is no back-up plan if a buyer cannot be found.

“It’s a big deal and people are OK with the credit,” said one sellsider. “But as a convertible, it doesn’t make any sense.”

He noted that the 0.25% convertibles hits parity at 75, with a 30% delta. As for the 1% convertibles, they are “hard to play from an outright perspective.”

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