Holiday weighs on convertibles trading; Twitter falls as bid prospects wane; Terravia ticks higher

By Stephanie N. Rotondo

Seattle, Oct. 10 – The Columbus Day trading session was muted as the day got underway, according to market sources on Monday.

“It’s been pretty quiet,” one trader said.

Twitter Inc. remained notable, however, after it was reported over the weekend that hopes of a takeover bid were waning.

The company’s 0.25% convertible notes due 2019 dropped to 93.5 from previous levels in a 94.5 to 95 context, as the 1% convertible notes due 2021 fell to 91-92 from 93.

The stock declined $2.29, or 11.64%, to $17.56.

On Saturday, Bloomberg reported that the social media company had cancelled a Friday meeting with advisors to discuss any possible bids. It was also reported that possible suitors such as salesforce.com, Google and Disney were no longer considering making an offer.

Twitter put itself up for sale in September, but has struggled to find a buyer amid concerns surrounding the company’s dwindling user growth and continuing losses. The market has also expressed concern that there is no back-up plan if a buyer cannot be found.

“It’s a big deal and people are OK with the credit,” said one sellsider. “But as a convertible, it doesn’t make any sense.”

He noted that the 0.25% convertibles hits parity at 75, with a 30% delta. As for the 1% convertibles, they are “hard to play from an outright perspective.”

Later in the day, however, it was reported that Salesforce.com was still considering making a play for Twitter, though shareholders continued to resist the idea.

Marc Benioff, salesforce.com’s chief executive officer, has been pushing for a takeover of Twitter, with plans to use the company’s platform more as a corporate tool than a consumer product.

Though salesforce.com’s convertibles had slipped after it was first reported the company had thrown its hat in the ring, the debt has since rebounded.

In Monday trading, that trend continued, as its 0.25% convertible notes due 2018 rose as high as a 124 handle from previous trades around 119.

The equity also improved, adding $4.19, or 5.92%, to close at $75.10.

Terravia trades up

A trader said it was “interesting” that Terravia Holdings Inc.’s 5% convertible notes due 2019 were trading – and gaining ground – in Monday trading.

He remarked that the name rarely trades and that there was no fresh news out to cause the activity.

However, he added that the South San Francisco-based manufacturer of algae-based products was in process of exchanging up to $4 million of its 6% convertible notes due 2018 for stock.

“It’s possible that something is going on” in the 5% notes as well, he speculated.

He also noted that the 5% paper was trading with a 30% yield to maturity.

The bonds traded up to a 52 to 52.5 context on Monday. That compared to levels with a 49 handle at the end of September.

As for the stock underlying the debt, it was up 4 cents, or 1.5%, at $2.70.

Mentioned in this article:

Salesforce.com NYSE: CRM

Twitter Inc. NYSE: TWTR

Terravia Holdings Inc. Nasdaq: TVIA

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