Microchip busy, weaker ahead of new issue; Twitter declines post-earnings; Medidata improves

By Stephanie N. Rotondo

Seattle, Feb. 9 – As the convertible bond market waited for a new deal from Microchip Technology Inc., the company’s 1.625% convertible notes due 2025 remained actively traded on Thursday.

The issue dominated trading on Wednesday after the company announced its latest earnings and also said it was planning to raise $2 billion via a two-tranche offering of convertible debt. The paper was also up 6 to 10 points over the course of the day.

But come Thursday, the convertibles were losing ground, slipping more than 7 points by the end of the day.

Twitter Inc. was another notable name for the day as the San Francisco-based social media company reported disappointing results.

The 1% convertible notes due 2021 were seen trading off 1 to 1.5 points to 91.25.

Twitter’s stock didn’t fare too well either, declining $2.31, or 12.34%, to $16.41.

Revenue was $717 million for the quarter, up 1% from the year before. However, analysts had been hoping for revenue of $740.1 million.

Net loss came to $167 million, or 23 cents per share. That was worse than the $90 million loss, or 13 cents per share, reported the year before.

On an adjusted basis, EPS was 16 cents, better than the 12 cents projected by analysts.

In other earnings news, Medidata Solutions Inc. issued results that beat expectations.

On the news, the company’s 1% convertible notes due 2018 jumped 8.25 points to 114.5, according to a market source.

Another source pegged the paper at 112.375, up 6 points.

The shares gained $7.80, or 16.25%, to close at $55.80.

For the fourth quarter, the technology company posted earnings per share of 33 cents, better than the 26 cents per share analysts had forecast.

Revenue came to $124.5 million, versus the analysts’ estimate of $124.15 million.

Microchip wanes

Microchip Technology’s convertibles fell from their midweek highs as the market prepared for the company’s new issue, which was expected to price after the market closed.

At the end of the day, a market source saw the 1.625% convertibles in a 139 to 140 context, down from 146.5 previously.

Another source said the issue was off more than 7 points at 139, while the 2.125% convertible notes due 2037 slid almost 12 points to 298.375.

Earlier in the day, the 1.625% convertibles were seen slipping to a 142 to 142.5 range.

The underlying equity was off $2.87, or 3.89%, at $70.93.

Late Wednesday, Microchip said it was selling $1.5 billion of convertible senior subordinated notes due 2027, which are talked at a 1.625% to 2.125% yield and an initial conversion premium of 37.5% to 42.5%. Additionally, another $500 million of convertible junior subordinated notes due 2037 will be sold, with yield talk between 2.2% and 2.75% and a conversion premium of 37.5% to 42.5%.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC, BofA Merrill Lynch, BMO, HSBC and U.S. Bank are running the books.

Pricing was expected after Thursday’s close, but details were not available as of press time.

The new issue announcement came on the heels of the company’s earnings release.

The Chandler, Ariz.-based manufacturer of microcontroller, memory and analog semiconductors posted adjusted third-quarter earnings per share of $1.05 on revenue of $881.2 million.

Analysts polled by FactSet had forecast EPS of 90 cents on revenue of $849 million.

The company also provided fourth-quarter guidance of $1.01 to $1.11 per share on revenue of $872 million to $908 million.

Analysts are predicting EPS of 93 cents on revenue of $863.4 million.

Mentioned in this article:

Medidata Solutions Inc. Nasdaq: MDSO

Microchip Technology Inc. Nasdaq: MCHP

Twitter Inc. NYSE: TWTR

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