Palo Alto convertible notes in focus, gain; Pinduoduo up outright; Theravance down

By Abigail W. Adams

Portland, Me., Aug. 24 – The convertibles secondary space was active on Monday on a strong day for equities with the S&P 500 index and Nasdaq broaching fresh records.

The Dow Jones industrial average closed the day up 31 points, or 0.09%, the S&P 500 index closed the day up 0.15%, the Nasdaq Composite finished up 0.52% and the Russell 2000 index ended up 1.02%.

There was $135 million in reported volume a little more than one hour into Tuesday’s session and $690 million on the tape at the market close.

However, there was a wide variety to the names that were active in the space.

Palo Alto Networks Inc.’s convertible notes were in focus with the notes surging outright and expanding dollar-neutral as stock rose double digits post-earnings.

Pinduoduo Inc.’s 0% convertible notes due 2025 were on the rise on an outright basis as the company’s equity broke its route and jumped more than 20% following its earnings.

However, Theravance Biopharma Inc.’s 3.25% convertible notes due 2023 and GSK Finance No. 3 plc (GlaxoSmithKline plc)’s 0% exchangeable notes due 2023 (A2/A) tied to Theravance were under pressure as Theravance’s stock plummeted following disappointing results from a clinical trial.

Palo Alto in focus

Palo Alto’s convertible notes dominated activity in the secondary space on Tuesday with the notes gaining on an outright and dollar-neutral basis as stock surged following earnings.

The cybersecurity company’s 0.375% convertible notes due 2025 rose almost 20 points outright with stock up more than 18%.

The 0.375% notes were changing hands just shy of 153 versus a stock price of $436.42 early in the session.

They continued to rise and were changing hands at 155.625 versus a stock price of $444.48 in the late afternoon.

The notes were seen expanded 0.125 point dollar-neutral early in the session, a source said.

There was $43 million in reported volume.

Palo Alto’s 0.75% convertible notes due 2023 rose 22 points outright.

They were changing hands at 166.875 versus a stock price of $437.50 early in the session.

They continued to gain and were seen changing hands at 168.375 versus a stock price of $441.56 by the market close.

The notes pushed out upwards of 1 point dollar-neutral early in the session, a source said.

There was about $55 million in reported volume.

Palo Alto’s stock traded to a low of $419.40 and a high of $446.91 before closing the day at $441.87, an increase of 18.57%.

Stock surged following blow-out earnings for the cyber-security firm.

Palo Alto reported earnings per share of $1.60 versus analyst expectations for earnings of $1.44.

Revenue was $1.22 billion versus analyst expectations for revenue of $1.17 billion.

Pinduoduo up outright

Pinduoduo’s 0% convertible notes due 2025 were active with the notes gaining on an outright basis as the company’s equity jumped following earnings.

The 0% notes were up 4 points outright with the Shanghai-based e-commerce company’s equity up over 20%.

The 0% notes were changing hands just shy of 95 versus an equity price of $99.31 at the market close.

There was $17.5 million in reported volume.

Pinduoduo’s American Depositary Shares traded to a low of $90.93 and a high of $99.77 before closing the day at $99.12, an increase of 22.25%.

The company’s ADSs surged after the company reported its first profitable quarter.

Pinduoduo reported earnings per share of $0.44 versus analyst expectations of a loss per share of $0.15.

However, the company missed top line expectations with revenue of $3.57 billion versus analyst expectations for revenue of $4.19 billion.

While the company reported its first profitable quarter, Pinduoduo announced its intention to donate $1.5 billion to farmers, a pledge most likely undertaken to stay in favor with China’s regulators.

The ADSs of China-based companies in general were catching a bid on Tuesday as buyers moved in following strong earnings.

Theravance under pressure

Theravance’s convertible notes and equity-linked notes were active on Tuesday as stock plummeted following disappointing clinical results.

GSK Finance No. 3 plc (GlaxoSmithKline plc)’s 0% exchangeable notes due 2023 (A2/A) tied to Theravance dropped about 1.5 points outright in heavy volume.

The 0% notes were changing hands at 99.875 versus an equity price of $9.70 heading into the close.

The 0% notes, which rarely trade, were among the most active during Tuesday’s session with more than $28 million in reported volume.

The exchangeable notes priced at 108.5.

Theravance’s 3.25% convertible notes due 2023 sank 4 points outright.

The notes were changing hands at 90.5 versus a stock price of $9.35 in the late afternoon.

There was more than $16 million in reported volume.

Theravance’s stock traded to a high of $10.44 and a low of $9.20 before closing the day at $9.24, a decrease of 34.79%.

Stock tanked after the biopharmaceutical company revealed disappointing results from a phase 2 study for a treatment for ulcerative colitis.

The results put in doubt the company’s partnership with Johnson & Johnson’s pharmaceutical unit Janssen.

Janssen partnered with Theravance to develop the treatment but can opt-out of the collaboration following the phase 2 studies, Investor’s Business Daily reported.

Mentioned in this article:

Palo Alto Networks Inc. NYSE: PANW

Pinduoduo Inc. Nasdaq: PDD

Theravance Biopharma Inc. Nasdaq: TBPH

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