Lumentum convertible notes in focus early, fall post earnings; Confluent rises

By Abigail W. Adams

Portland, Me., Feb. 8 – The convertibles primary market remained silent on Thursday with the market poised for the first paperless week of 2024.

While the calendar has not been as robust as hoped, an uptick in issuance is expected with demand and equity markets strong.

While no new paper entered the secondary space over the past week, there was an uptick of activity on Thursday as earnings-related volatility continued to spark movement in the space.

Equity indexes were either side of unchanged early Thursday after the S&P 500 index closed Wednesday with a fresh all-time high.

However, equities saw a strong close with the small cap index the outperformer.

The Dow Jones industrial average closed Thursday up 49 points, or 0.13%, the S&P 500 index closed up 0.06%, the Nasdaq Composite index closed up 0.24% and the Russell 2000 index closed up 1.5%.

There was $112 million in reported convertible bond trading volume about one hour into the session and $537 million on the tape in the late afternoon.

Lumentum Holdings Inc.’s convertible notes were in focus with the notes sinking outright as stock nosedived after earnings.

However, Confluent Inc.’s 0% convertible notes due 2027 saw a large movement to the upside after better-than-expected earnings results.

Lumentum active

Lumentum’s convertible notes were in focus with the notes falling outright as stock nosedived after earnings.

Lumentum’s 0.5% convertible notes due 2026 fell about 5 points outright with stock off more than 22%.

The 0.5% convertible notes were trading at 88.375 early in the session, according to a market source.

They were changing hands at 87.875 versus a stock price of $47.20 in the late afternoon.

There was $34 million on the tape.

Lumentum’s longer-duration 0.5% convertible notes due 2028 were off 4 points outright.

They were seen at 78.375 versus a stock price of $49.26 in the late afternoon.

There was $8 million in reported volume.

The optical and photonics maker’s more balanced 1.5% convertible notes due 2029 sank 12 points outright.

They were trading at 95.375 versus a stock price of $48.70 in the late afternoon.

There was $17 million in reported volume.

Lumentum’s stock traded to a low of $45.38 and a high of $51.32 before closing at $45.58, down 22.43%.

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.

Confluent rises

Confluent’s 0% convertible notes due 2027 were on the rise in active trade after the software company reported a large earnings beat.

The 0% convertible notes added 4 to 5 points outright.

They were trading at 85.75 in the late afternoon, according to a market source.

The yield was about 5.375%.

There was $13 million in reported volume.

Confluent’s stock traded to a low of $30.11 and a high of $32.88 before closing at $32.57, an increase of 34.09%.

Stock soared after the company reported earnings per share of 9 cents versus the 5 cents expected.

Revenue was $213.18 million versus the $205.56 million expected.

The company’s forward guidance also came in well above expectations.

Mentioned in this article:

Confluent Inc. Nasdaq: CFLT

Lumentum Holdings Inc. Nasdaq: LITE

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