U.S. convertibles mixed as earnings in focus; recently priced Teladoc adds dollar neutral

By Rebecca Melvin

New York, July 27 – U.S. convertibles remained mixed on Thursday with more sellers than buyers as trading revolved mostly around second-quarter earnings reports and other company-specific news, a New York-based sellsider said.

There was also some action among mandatory issues, and those were said to be trading in efforts to reposition ahead of month end on Monday.

The market was mixed in light volume on Wednesday.

ServiceNow Inc. was a top trader, according to Trace data, with the ServiceNow’s 0% convertibles due 2022 changing hands up about 0.25 point to 104.8, in line with the underlying shares of the Santa Clara, Calif.-based provider of enterprise cloud computing software.

ServiceNow reported earnings that were impressive on first blush, but the overall report left investors flat. Second-quarter revenue surged to $471 million, which was up 38% from $341.3 million of revenue for the same period a year earlier. But the firm’s net loss widened to $56.5 million from $49.63 million in the year-earlier period.

Adjusted earnings were positive, at 23 cents per share, which was up from adjusted income of 16 cents per share for the same period last year.

Also trading actively after earnings was LendingTree Inc., which saw a bump up on an outright basis in the convertibles in line with the underlying shares after the Charlotte, N.C.-based online provider of home, auto and student loans reported second-quarter results and increased full-year guidance.

LendingTree’s 0.625% convertibles due 2022 traded at 125.875 as shares surged $33.35, or 18%, to $217.15.

Meanwhile, Teradyne Inc. moved in the opposite direction amid disappointing quarterly results.

The Teradyne 1.25% convertibles due 2023 fell in excess of 7.5 points to about 123, according to Trace data. Shares of the North Reading, Mass.-based supplier of automatic test equipment fell $2.42, or 7%, to $34.38.

Elsewhere, Teladoc Inc.’s recently priced 3% convertibles due 2022 were seen moving up about 80 cents dollar-neutral as the underlying stock fell. The expansion was noted when shares were down 7.5%.

News that Amazon.com Inc. is looking at opportunities to expand into the telehealth company’s business, which includes telemedicine and medical documentation, seemed to rattle Teladoc investors.

Teledoc’s 5.5-year 3% convertible notes were quoted at 103.25 bid, 104 offered versus an underlying common share price of $31.50.

The company priced $240 million of the convertibles, upsized from an originally planned $200 million, in June.

“We’re trading a bunch of Teladoc. It had news and the stock is down 7.5%, but it actually opened up 80 cents dollar neutral,” a New York-based sellsider said, adding that outright investors were buying on weakness and hedged investors were taking profits.

Mandatory convertibles were also in the trading mix on Thursday, including Becton Dickinson & Co.’s 6.125% mandatory convertible preferred shares, which closed the day down 6 cents, or 0.1%, at $55.92, compared to Becton Dickinson’s common shares, which shed 0.5%.

The mandatories of Teva Pharmaceutical Industries Ltd., recently priced Crown Castle International Corp., Allergan plc and the mandatory exchangeables into Alibaba Group Holding Ltd. were also seen in trade.

And Intel Corp.’s convertibles were trading ahead of the chip maker’s earnings, which were reported after the close.

Despite increasing competition, Intel said that it quarterly earnings were able to grow in many of its units. Intel also reiterated guidance that its data-center revenue would grow in the high single digits for the full year.

Intel’s 3.493% convertibles due 2035 traded at 133.865 during the session, which was up 0.3 point.

Mentioned in this article:

Alibaba Group Holding Ltd. NYSE: ADS: BABA

Allergan plc NYSE: AGN

Becton Dickinson & Co. NYSE: BDX, BDXA

Crown Castle International Corp. NYSE: CCI

Intel Corp. Nasdaq: INTC

LendingTree Inc. Nasdaq: TREE

ServiceNow Inc. Nasdaq: NOW

Teladoc Inc. Nasdaq: TDOC

Teradyne Inc. NYSE: TER

Teva Pharmaceutical Industries Ltd. Nasdaq: ADS: TEVA

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