Convertibles secondary market ‘hot’ as equities skyrocket; SolarEdge, Novocure gain

By Abigail W. Adams

Portland, Me., Nov. 5 – The convertibles secondary space was on fire on Thursday as equities extended their winning streak and erased their losses from the sell-off the previous week.

The Dow Jones industrial average closed the day up 542 points, or 1.95%, the S&P 500 was up 1.95% and the Nasdaq Composite was up 2.59%.

The rally comes as the vote count continues with control of the White House and the Senate still undetermined.

“The market’s been acting like nothing is relevant,” a source said. “It just keeps moving up.”

However, the rise in equities also lifted the secondary space, which was “hot” on Thursday, a source said.

While the primary market has been dormant with no new deals since Novocure Ltd. priced its $500 million offering of 0% convertibles due 2025 on Tuesday, the secondary space was active with buyers flooding the space.

“Have offer, will trade,” a source said.

Estimated volume was $2 billion at market close, a source said.

Novocure’s 0% convertible notes due 2025 remained active with the notes rising alongside stock. The issue’s greenshoe was exercised, lifting the deal to $575 million.

SolarEdge Technologies Inc.’s 0% convertible notes due 2025 were also on the rebound as stock recovered from Tuesday’s post-earnings sell-off.

LendingTree Inc.’s 0.5% convertible notes due 2025 tanked on an outright basis with the notes dropping below par as stock got crushed following its earnings report.

Novocure gains outright

Novocure’s recently priced 0% convertible notes due 2025 remained active with the notes continuing to gain on an outright basis.

The notes traded up to a 106-handle on Thursday, sources said.

While the notes were largely moving in line on a dollar-neutral, or hedged, basis, they maintained their large dollar-neutral expansion.

Novocure’s stock traded to a high of $127.71 and a low of $121.60 before closing the day at $122.19, an increase of 0.2%.

The notes have expanded 2 points dollar-neutral since hitting the market on Tuesday, a source said.

SolarEdge improves

SolarEdge’s 0% convertible notes due 2025 were improved in active trading as stock rebounded from a post-earnings sell-off.

The 0% notes were changing hands at 114.5 versus an equity price of $227.18 early in the session, a source said.

They were seen changing hands at 113 versus an equity price of $223.00 in the late afternoon.

SolarEdge’s stock traded to a high of $236.00 and a low of $219.20 before closing the day at $233.63, an increase of 13.11%.

Stock was rebounding after crashing more than 20% on Tuesday following the company’s third-quarter earnings report.

Holders that were playing the notes on a 75% delta saw the notes expand on Tuesday on the move down, a source said.

However, those that had the notes on a 70% delta lost money on the stock move.

LendingTree contracts

LendingTree’s 0.5% convertible notes due 2025 sank on an outright and dollar-neutral basis on Thursday as stock tanked following the company’s third-quarter earnings report.

The 0.5% notes dropped almost 9 points outright with stock down 15%.

They sank below par and were changing hands around 95.75 in the late afternoon.

The notes contracted 1 point dollar-neutral on the move down, a source said.

LendingTree’s stock traded to a high of $334.98 and a low of $284.11 before closing the day at $295.00, a decrease of 15.42%.

While LendingTree beat analyst expectations on the top line, it missed on the bottom with forward guidance also lower than expected.

LendingTree reported a loss per share of 26 cents versus analyst expectations for a loss per share of 13 cents.

Revenue was $220.3 million versus analyst expectations for revenue of $210.6 million.

LendingTree projects revenue of $200 million to $215 million in the fourth quarter, which missed analyst expectations for revenue of $215.4 million.

Mentioned in this article:

LendingTree Inc. Nasdaq: TREE

Novocure Ltd. Nasdaq: NVCR

SolarEdge Technologies Inc. Nasdaq: SEDG

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