Chegg, Peloton convertibles under pressure ahead of earnings; Fortive, Illumina active

By Abigail W. Adams

Portland, Me., May 3 – The convertibles primary market was quiet on Monday.

While new deal activity is expected to remain muted over the coming week, sources do expect some action from the primary market over the next two sessions.

Meanwhile, it was an equally quiet day in the secondary space with few names on the tape and little movement in the names that did trade.

“There’s not much happening at all,” a source said.

“Today’s not exactly a barn burner,” another source said.

There was $346 million in reported volume about one hour before the market close.

Fortive Corp.’s 0.875% convertible notes due Feb. 15, 2022 and Illumina Inc.’s 0.5% convertible notes due June 1, 2021 were the most active bonds on the tape.

However, the soon-to-mature convertible notes were largely unchanged, sources said.

While Monday was quiet, the coming week will be an active one in terms of earnings with several convertibles issuers scheduled to report results.

Chegg Inc.’s 0% convertible notes due 2026 were trading down alongside stock with the education technology company reporting after the close.

While not active on Monday, Peloton Interactive Inc.’s 0% convertible notes due 2026 remained under pressure with the company’s stock hitting a recent low.

Unchanged

Fortive’s 0.875% convertible notes due Feb. 15, 2022 and Illumina’s 0.5% convertible notes due June 1, 2021 saw the heaviest volume on an uneventful day in the secondary space.

However, the soon-to-mature notes were unchanged in the activity.

Fortive’s 0.875% convertible notes were changing hands at 101.5 early in the session.

They were marked at 101.375 versus a stock price of $71.54 in the late afternoon, according to a market source.

The bonds saw almost $19 million in volume.

Fortive’s stock traded to a high of $72.38 and a low of $70.85 before closing the day at $71.25, an increase of 0.61%.

The trading activity was a continuation from last Friday with the issue active heading into the close, a source said.

The activity was most likely the result of end-of-the-month capital raising, another source said.

Illumina’s soon-to-mature 0.5% convertible notes due June 1, 2021 were also active.

The notes were changing hands at 152.25 versus a stock price of $388.30 in the late afternoon, according to a market source.

The 0.5% notes saw $15 million in reported volume. However, the activity took place over three trades.

The notes are mostly held by convertibles arbitrage players and largely move in line with stock, a source said.

Illumina’s stock traded to a high of $396.66 and a low of $385.98 before closing the day at $386.40, a decrease of 1.64%.

Chegg’s earnings

Chegg’s 0% convertible notes due 2026 were active and trading down alongside stock in the runup to the education technology company’s earnings report.

The 0% convertible notes were down about 4 points outright with stock off more than 8%.

The notes were changing hands at 107 versus a stock price of $86 in the late afternoon, a source said.

There was about 10 million in reported volume.

Chegg’s stock traded to a high of $91.52 before closing the day at the intersession low of $83.01, a decrease of 8.14%.

“They’re getting hit ahead of time,” a source said.

However, Chegg’s stock popped in the aftermarket following the company’s earnings announcement.

While the company beat expectations on the top line and reported large subscriber growth, it missed on the bottom line.

Chegg reported earnings per share of 28 cents, which missed analyst expectations for earnings per share of 31 cents.

The company reported revenue of $198.4 million, which beat expectations for revenue of $184.59 million.

Chegg also reported 4.8 million subscribers, a 64% year-over-year increase.

Stock traded back up to $90.10, an increase of 8.54%, by 5 p.m. ET.

Peloton’s new low

While Peloton’s 0% convertible notes due 2026 were not actively traded on Monday, the notes remained under pressure as stock hit a recent low.

The 0% convertible notes were marked at 90.5 bid, 91.25 offered on Monday.

It was the lowest level for the notes since the media and exercise company priced the $1 billion issue in mid-February, a source said.

Peloton’s stock traded to a high of $99.82 and a low of $95.31 before closing the day at $95.84, a decrease of 2.55%.

It was the lowest level for the stock since September 2020.

Peloton’s stock has been under pressure since last week when the Consumer Product Safety Commission urged owners with children to discontinue use of the company’s treadmill.

Peloton’s CEO has publicly pushed back against the safety warning, claiming the product does not pose a threat if used as directed.

Peloton is scheduled to report earnings after the market close on Thursday.

Mentioned in this article:

Chegg Inc. NYSE: CHGG

Fortive Corp. NYSE: FTV

Illumina Inc. Nasdaq: ILMN

Peloton Interactive Inc. Nasdaq: PTON

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