Lucid convertibles top par on volatile day for stock; Fortive active; DigitalOcean down

By Abigail W. Adams

Portland, Me., Dec. 13 – It was a quiet day in the convertibles secondary space with equities under pressure on the eve of the Federal Reserve’s highly anticipated Wednesday announcement with a hawkish pivot away from pandemic-era stimulus expected.

The Dow Jones industrial average closed the day down 320 points, or 0.89%, the Nasdaq Composite was down 1.39%, the S&P 500 index was down 0.91% and the Russell 2000 index was down 1.42%.

There was $593 million in reported volume at the market close with Lucid Group Inc.’s 1.25% convertible notes due 2026 continuing to dominate the tape.

While the overall market was under pressure, Lucid’s 1.25% notes improved in the high-volume activity on a volatile day for the company’s stock.

Fortive Corp.’s 0.875% convertible notes due Feb. 15, 2022 were among the major volume movers in the space with the notes maturing in less than two months.

Selling pressure continued in some of the high-flyers with market players appearing to unload some of the year’s underperformers as they position themselves for the new year.

DigitalOcean Inc.’s 0% convertible notes due 2026 continued to trend lower on an outright basis alongside stock.

Lucid tops par

Lucid’s 1.25% convertible notes due 2026 remained in focus on Monday. While the notes were volatile alongside stock, they stood poised to close the day above par and with nominal dollar-neutral gains.

The 1.25% convertible notes traded up to a 101-handle as stock jumped 8% at market open.

However, they traded as low as 99.375 as stock came in as the session progressed.

The notes improved alongside stock and were changing hands at 100.5 heading into the market close.

They improved about 0.125 point on hedge during Monday’s session, a source said.

There was about $44 million in reported volume.

Lucid’s stock traded to a low of $36.84 and a high of $40.29 before closing the day at $39.15, an increase of 3.96%.

While wavering between positive and negative territory throughout the session, stock closed the day with strong gains following its addition to the Nasdaq-100 index.

Lucid priced a $1.75 billion offering of the 1.25% convertible notes at 99.5 after the market close on Thursday.

The notes underperformed on their secondary market debut on Friday with the notes trading below their discounted issue price and contracting 1.5 points to 2 points dollar-neutral.

Fortive matures

Fortive’s 0.875% convertible notes due Feb. 15, 2022 saw heavy volume on Monday as the notes approach their maturity.

The notes were changing hands between par and 100.4 in the high-volume activity.

There was about $33 million in reported volume.

The notes will be redeemed at par plus accrued interest upon their maturity with the company’s stock still well below the conversion price of the notes, a source said.

Fortive’s stock closed Monday at $74.92, a decrease of 0.32%.

Fortive priced a $1,437,500,000 issue of the 0.875% notes in February 2019.

DigitalOcean down again

DigitalOcean’s 0% convertible notes due 2026 continued to trend lower on an outright basis as stock remained under pressure.

The 0% notes were down 1.5 points outright with stock off more than 4%.

The notes were changing hands at 89.625 versus a stock price of $80.50 in the late afternoon.

There was $13 million in reported volume.

DigitalOcean’s stock traded to a high of $84.40 and a low of $78.16 before closing the day at $80.55, a decrease of 4.36%.

DigitalOcean priced a $1.5 billion issue of the 0% convertible notes at par on Nov. 15 with an initial conversion premium of 50%.

However, stock has cratered about 32% since the convertible notes priced.

DigitalOcean is among the high growth stocks that have been pummeled as the market prepares for a normalization of monetary policy and higher interest rate environment.

Mentioned in this article:

DigitalOcean Inc. NYSE: DOCN

Fortive Corp. NYSE: FTV

Lucid Group Inc. Nasdaq: LCID

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