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Morning Commentary: Lumentum convertible notes in focus early, fall post earnings
By Abigail W. Adams
Portland, Me., Feb. 8 – While the convertibles primary market remained silent on Thursday, the secondary space saw an uptick of activity with earnings-related volatility continuing to spark movement in the space.
Equity indexes saw a muted open and were either side of unchanged early in the session after the S&P 500 index closed Wednesday with a fresh all-time high.
The Dow Jones industrial average was down 62 points, or 0.17%, the S&P 500 index was down 0.5%, the Nasdaq Composite index was up 0.25% and the Russell 2000 index was up 0.90% shortly before 11 a.m. ET.
There was $112 million in reported volume about one hour into the session with Lumentum Holdings Inc.’s 0.5% convertible notes due 2026 in focus as stock nosedived after earnings.
Lumentum’s 0.5% convertible notes due 2026 fell 4 points outright with stock off 17% early in the session.
The 0.5% convertible notes were trading at 88.375 in heavy volume, according to a market source.
There was $22 million on the tape.
Lumentum’s longer-duration 0.5% convertible notes due 2028 and 1.5% convertible notes due 2029 were not active early in the session.
Lumentum’s stock was trading at $49.14, a decrease of 16.44%, shortly before 11 a.m. ET.
Lumentum reported an earnings beat with earnings per share of 32 cents versus the 30 cents expected and revenue of $366.8 million versus the $363 million expected.
However, the company issued weak guidance, which sparked heavy selling in the stock.
Market expectations were high heading into Lumentum’s earnings report with stock and the 0.5% convertible notes due 2026 strong over the past few sessions.
The 0.5% convertible notes due 2026 gained 2 to 3 points outright over the past week and were trading on a 92-handle heading into Thursday’s session.
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