Convertibles primary on hold; Fortive, Sea notes active in secondary; Chegg contracts

By Abigail W. Adams

Portland, Me., Jan. 25 – The convertibles primary market remained on hold on Tuesday as volatility continued in equity markets on the eve of the Federal Reserve’s Wednesday announcement.

Several deals that were planned for January have been placed on the back burner due to the tumult in equities, a source said.

Equity benchmarks continued to whipsaw between large losses and nominal gains on Tuesday.

While indexes opened the day with steep losses, late afternoon buying pushed them into positive territory.

However, the buying spree was followed by selling with indexes closing the day deep in the red.

The Dow Jones industrial average closed the day down 67 points, or 0.19%, the S&P 500 index closed down 1.22%, the Nasdaq Composite was down 2.28% and the Russell 2000 was down 1.24%.

The market will be awaiting the Federal Reserve’s announcement on Wednesday with baited breath. “People are on pins and needles,” a source said.

While equities continued to whipsaw, selling continued in the secondary space with holders focused on offloading their profitable position to raise cash in case of redemptions, a source said.

However, the selling activity on Tuesday was orderly.

Several convertibles were trying to find their bond floor amid the downturn in equities.

Sea Ltd.’s 0.25% convertible notes due 2026 were among the top traded issues in the secondary space with the notes continuing their downward trajectory.

Chegg Inc.’s 0% convertible notes due 2026 were also lower on an outright and dollar-neutral basis.

Fortive Corp.’s 0.875% convertible notes due Feb. 15, 2022 continued to see high-volume activity as the notes approach their maturity.

While the convertibles market has suffered outsized losses in the past few weeks in anticipation of pending rate hikes, the high-yield market has held in well.

With credit spreads relatively stable amid the turmoil in equities, there is hope for a snap back in the convertibles market.

Sea active

Sea’s 0.25% convertible notes due 2026 were among the top traded issues during Tuesday’s session with the notes continuing their downward trajectory.

The 0.25% notes were down another 0.5 point outright. They traded as low as 81.75 in intraday activity and were changing hands at 82.375 in the late afternoon.

The notes were offering a yield of about 4.5%.

Sea’s American Depositary Shares traded to a low of $139.25 and a high of $149.34 before closing the day at $144.92, a decrease of 2.95%.

The 0.25% convertible notes have lost about 2 points outright over the past two session. They closed Friday on an 84-handle.

Chegg comes in

Chegg’s 0% convertible notes due 2026 were lower on an outright and dollar-neutral basis during Tuesday’s session.

The 0% convertible notes were down about 1 point in high-volume activity with stock off more than 5%.

They were changing hands in the 80 to 80.5 context during the session.

The notes contracted about 0.75 point outright, a source said.

Chegg’s stock traded to a low of $25.15 and a high of $26.90 before closing the day at $25.23, a decrease of 5.33%.

Fortive’s end nears

Fortive’s 0.875% convertible notes due Feb. 15, 2022 remained in focus on Tuesday with the maturity of the notes about two weeks away.

The 0.875% notes continued to trade around par with a yield just north of 1%.

The notes have seen active “end of life” trading as they approach their maturity.

The notes will be redeemed at par upon their maturity with the conversion value of the notes long gone, a source said.

Mentioned in this article:

Chegg Inc. NYSE: CHGG

Fortive Corp. NYSE: FTV

Sea Ltd. NYSE: SE

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