Semtech convertibles bring hope to primary; Li Auto hit hard; Splunk active; Revance up

Chicago, Oct. 6 – The primary market had a nibble on Thursday as Semtech Corp. came on the scene with a $250 million offering of convertible senior notes.

The company’s stock dropped a relatively standard 8.74% on the day in anticipation of the new bonds.

The exciting two-day market rally at the beginning of the week seemed to fizzle as investors anticipated indicator releases for the upcoming week and digested the very real possibility that oil prices are not likely to come down for the next several months as OPEC announced an oil production cut on Wednesday.

A pending payroll release, an indication that the Fed is still hawkish and upcoming inflation data were not enough to move the equity dial too much, with stocks retreating on the S&P 500 index 1.02%, the Nasdaq Composite index 0.68% and the Russell 2000 index 0.58%.

Li Auto drives lower

Chinese electric vehicle maker Li Auto Inc.’s stock got pummeled, though, on Thursday, down 12.34%.

The rout bled over into the company’s convertible bond space on an active day for the 0.25% issue due 2028.

The bonds generally do not trade every day.

Propelled into action, the bonds moved sharply down 5 points from their last substantial trade last Friday.

The notes even dropped a bonus 0.25 point at the end to end at 99 bid.

The company’s stock moved to $20.95.

The bonds priced in April 2021 against a stock price of $22.23.

Fortunes have been volatile, rising and falling on a dime, generally for EV automakers.

For instance, it was big news for Tesla Inc. on Thursday as it got the imprimatur of investment-grade status by S&P Global Ratings, a shift up to the formidable BBB from a BB+ for Tesla’s issuer credit rating and issue-level ratings.

But supply troubles and consumer demand have been swinging wildly for the sector.

Splunk active

Splunk Inc.’s convertible bonds started Thursday in activity, trading that did not let up as the day progressed.

In spite of a substantial amount of activity, the San Francisco-based software company’s three bonds generally maintained regular trading levels.

The company’s 0.5% convertibles, which mature one year from now, were marked at 96.22 at the close, in line with where they ended on Wednesday at 96.12 and on Tuesday at 96.44.

The 1.125% convertibles due 2025 were marked at 90.42 bid in the late afternoon. The bonds traded to their lowest level last week, on an 88-handle.

The 1.125% convertible bonds due 2027 finished at 79.9 with fewer, smaller trades. The notes closed in line with Wednesday’s end-of-day price at 79.875 but a touch lower than the 80-handle on Tuesday.

Splunk’s stock was off 4.54% on Thursday, closing the day at $79.53 per share. The company’s stock has not been this low since December 2017.

Revance smiles

On a positive note, Revance Therapeutics Inc.’s 1.75% convertibles due 2027 continued their upswing.

A rarity, the bonds are higher than where they started in 2022, a trajectory that started in May.

The company’s first-quarter total revenue was up 89.9% when it announced earnings on May 10.

The notes were active on Thursday, shooting up another 3.5 points to 116.83 late in the day.

The company’s stock was 5.09% better on the day, ending at $30.66.

Based in Nashville, the company received FDA approval in early September for an injection that helps with moderate to severe frown lines.

Name of the week

Checking on Twitter Inc., the hot topic of the week, the company’s 0.25% convertibles due 2024 were slightly relaxed in a voluminous session with sizable trades on the board.

A source noted that news was out on Thursday morning that Apollo and Sixth Street had pulled their interest in the deal some time ago when Elon Musk started to walk away, casting a shadow on the financing for the takeover deal by Elon Musk.

The bonds were on a 109-handle Wednesday evening but slid steadily and evenly over Thursday, ending just below 108 as evening approached.

Twitter’s stock was 3.72% lower on Thursday, dropping to $49.39, as people tried to read the tea leaves regarding the company’s future owner(s).

Wayfair notes lower

Wayfair Inc. was kicked into action on Thursday, although the company’s most recent issue of 3.25% notes due 2027 were not the most active bond issue for the name, but did drop around 2.5 points to land at 81.73.

The home decor e-commerce company’s 0.625% notes changed hands more frequently, moving into a 63-handle range from a Tuesday and Wednesday when they were all over the place between 63 and 67, but mostly at the mid- to upper-end of that range.

Wayfair’s stock did not fare well in Thursday trading, dropping 5.4% on the day to hit $33.65 at the end.

Solaredge declines

Solaredge Technologies Inc. was not the most active name on the tape in Thursday’s session, but the Israeli company’s zero-coupon convertibles due 2025 dropped to one of their lowest levels ever.

Traders were moving the notes at roughly 108.5 at midafternoon, down from a mini-bounce earlier in the week when everything was positive.

The company’s stock was lower by 5.96%, trading at $220.27.

Some insiders have recently been selling their stock, not helping the company’s share price, which is down 22% year to date.

Mentioned in this article:

Li Auto Inc. Nasdaq: LI

Revance Therapeutics Inc. Nasdaq: RVNC

Semtech Corp. Nasdaq: SMTC

Solaredge Technologies Inc. Nasdaq: SEDG

Splunk Inc. Nasdaq: SPLK

Twitter Inc. NYSE: TWTR

Wayfair Inc. NYSE: W

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