Morning Commentary: Snap convertible notes in focus, gain outright

By Abigail W. Adams

Portland, Me., Aug. 31 – Trading volume remained thin on Wednesday as equities attempted to snap three days of heavy selling.

Equity indexes were wavering on either side of flat early in the session with the Dow Jones industrial average down 7 points, or 0.02%, the S&P 500 index up 0.07%, the Nasdaq Composite index up 0.10% and the Russell 2000 index down 0.05%.

There was $52 million in reported volume about one hour into the session with one name dominating the tape.

Snap Inc.’s convertible notes were in focus with the notes up outright but mixed on hedge as stock skyrocketed on the company’s cost cutting measures.

Snap’s 0.75% convertible notes due 2026 were the most active in the capital structure.

The notes increased 3.625 points outright with stock up as much as 13% in early trading.

The notes were changing hands at 93.125 versus a stock price of $11.41 early in the session.

The convertibles gained on swap on the move up.

They move on a theoretical delta of 54%, a source said.

There was $7 million in reported volume.

Snap’s 0.125% convertible notes due 2028 gained 1 point outright.

The notes were changing hands at 71 versus a stock price of $11.44 early in the session.

They move on a theoretical delta of 75%, a source said.

Snap’s stock traded as high as $11.60 before coming in to trade at $10.78, an increase of 7.88%, shortly before 11 a.m. ET.

Stock soared after the social media company announced several cost-cutting measures, including laying off 20% of its workforce and scrapping several projects.

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