Convertibles primary silent; j2 Global active; Southwest Airlines volatile; Teladoc up

By Abigail W. Adams

Portland, Me., July 30 – The convertibles primary market was again silent on Thursday with the July 27 week poised to be the first week with no new issuance since the primary market reopened in April following March’s sell-off.

While the primary market took a breather over the past week, the lull in activity is expected to be temporary with several sources indicating there was a full pipeline.

The floodgates are expected to open in August pending market conditions.

Meanwhile, the secondary space was holding on Thursday as equities sold off following a slew of negative economic data.

While indexes opened the day deep in the red, they rallied into the close ending the day mixed.

The Dow Jones industrial average closed the day down 225 points, or 0.85%, and the S&P 500 index ended down 0.38%.

However, the Nasdaq composite closed the day up 0.43%.

The GDP shrank 9.5% in the second quarter, which equates to the steepest annualized decline since 1947, and unemployment claims increased for the second straight week, Bloomberg reported.

While weaker, the secondary space was still better to buy with little to no panic selling taking place, a market source said.

There was about $500 million in reported volume about an hour before the market close.

j2 Global Inc.’s 1.75% convertible notes due 2026 remained active on Thursday as stock again set a new 52-week low in intraday activity.

Southwest Airlines Co.’s 1.25% convertible notes due 2025 were volatile in high-volume activity with the notes weaker at the start of the session but poised to close the day unchanged.

While markets were soft, Teladoc Inc.’s 1.25% convertible notes due 2027 were making gains on an outright and dollar-neutral basis after a second-quarter earnings beat.

j2 Global active

j2 Global’s 1.75% convertible notes due 2025 saw another active session on Thursday as the technology company’s stock set a new 52-week low in intraday activity.

The 1.75% notes were down about 0.5 point outright to 75.375 early in the session. However, they rebounded alongside stock and were changing hands around 76.25 in the late afternoon.

j2 stock set a new 52-week low of $53.24 in early trading, breaking its previous 52-week low which was set on Wednesday.

However, stock rebounded as the session progressed and traded to a high of $56.49 before closing the day at $56.20, an increase of 1.33%.

While the notes mostly trade outright, some of the notes are up on hedge, a source previously said.

The 1.75% notes were also active on Wednesday.

j2 Global is “a controversial name,” a source said.

The company was the subject of a short-seller report from Hindenburg Research in late June, which alleged the technology company made some dubious acquisitions which enriched insiders.

Several law firms have launched securities class action lawsuits against the company.

Southwest volatile

Southwest Airlines’ 1.25% convertible notes due 2025 were volatile in high-volume activity on Thursday.

While the notes were weaker early in the session, they stood poised to close the day unchanged, a source said.

Southwest’s 1.25% convertible notes were changing hands around 117.25 in the late afternoon.

Southwest stock traded to a high of $31.65 and a low of $30.77 before closing the day at $30.96, a decrease of 2.61%.

Southwest’s convertible notes offer one of the best opportunities to play the recovery in air travel.

The company is a solid credit with a large fundamental advantage over other major airline carriers, according to the Barclays report “Southwest Converts: Prudent Airline Exposure for Turbulent Times.”

Southwest’s convertible notes have posted large gains on an outright and dollar-neutral basis since the company priced the $2 billion issue in April – the largest convertible bond deal year to date.

However, industry peer American Airlines Group Inc.’s 6.5% convertible notes due 2025 have seen large losses.

After contracting 1.5 points dollar-neutral on Wednesday, the 6.5% notes were again weak on Thursday, albeit in light volume.

The 6.5% notes traded down to 84 in the late afternoon.

American Airlines’ stock traded to a high of $11.39 and a low of $11.12 before closing the day at $11.18, a decrease of 1.93%.

Teladoc gains

Teladoc’s 1.25% convertible notes due 2027 were making gains on an outright and dollar-neutral basis as stock popped following its earnings report.

The 1.25% notes gained 6 points outright to trade up to 127 in the late afternoon.

They expanded about 1 point dollar-neutral, a market source said.

Teladoc’s stock traded to a low of $210.95 and a high of $239.35 before closing the day at $237.07, an increase of 8.44%.

While the telemedicine company missed on the bottom line, it beat on the top with the surge in revenue expected to continue.

Teladoc posted losses per share of 34 cents, which was wider than analyst expectations for losses of 22 cents.

However, the company reported revenue of $241 million, which beat analysts’ expectations for revenue of $220.7 million, Barron’s reported.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

j2 Global Inc. Nasdaq: JCOM

Southwest Airlines Co. NYSE: LUV

Teladoc Inc. NYSE: TDOC

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