Volatility hits equities; Nio, Integer convertibles gain; Perficient lower; Snap settles

By Abigail W. Adams

Portland, Me., July 27 – There was an uptick of activity in the convertibles secondary space on Thursday as volatility hit equity indexes with the Dow Jones industrial average ending its record-setting 13-day winning streak.

Equities stood poised for a blockbuster session with indexes up strongly on the heels of another GDP report that blew past forecasts and a Personal Consumption Expenditures report that came in below expectations.

However, heavy selling set in midway through the session with indexes closing the day in the red.

The Dow Jones industrial average closed Thursday down 237 points, or 0.67%, the S&P 500 index closed down 0.64%, the Nasdaq Composite index closed off 0.55% and the Russell 2000 index closed down 1.29%.

“Everyone’s impressed by the equity rally,” a source said early in the session.

“I think the market finally got exhausted with buying,” another source said in the late afternoon.

Heavy selling also hit Treasuries with the 10-year yield rising 14 bps to close the day at 4.003%.

There was no clear reason for the market reversal.

While broader markets were volatile, it was earnings-related volatility that continued to drive activity in the secondary space, which saw $60 million in reported convertibles trading volume about one hour into the session and $500 million on the tape about one hour before the market close.

Nio Inc.’s 0.5% convertible notes due 2027 gained in heavy volume with the Shanghai-based EV maker’s equity rallying on renewed investor interest in China and the topical news of an industry peer.

Integer Holdings Corp.’s 2.125% convertible notes due 2028 were on the rise on an outright and dollar-neutral basis after a strong earnings report.

However, Perficient Inc.’s 0.125% convertible notes due 2026 were lower on an outright and dollar-neutral basis as stock cratered more than 25% post-earnings.

Activity in Snap Inc.’s convertible notes settled with the notes largely unchanged after the large move of the previous session.

Nio improves

Nio’s 0.5% convertible notes due 2027 were on the rise in heavy volume on Thursday after a massive run-up in the company’s equity.

The 0.5% notes gained about 2 points outright to trade on an 85-handle.

The high-premium notes were changing hands at 85.875 in the late afternoon.

They gained about 0.5 point dollar-neutral.

The notes were among the most active of Thursday’s session with $16 million in reported volume.

Nio’s American Depositary Shares traded to a high of $13.87 and a low of $13.16 before closing at $13.23, up 0.46%.

The Shanghai-based EV maker’s equity continued to add after a 10.6% gain the previous session.

Nio has been a benefactor of renewed investor interest in China spurred by the government’s pledge for economic stimulus.

The EV maker also benefited from news Volkswagen AG was making a $700 million investment in industry peer XPeng Inc.

Integer’s results

Integer’s 2.125% convertible notes due 2028 were on the rise on an outright and dollar-neutral basis after better-than-expected earnings results.

The 2.125% notes rose 6.5 points outright to trade just shy of 123.

They gained about 0.5 point dollar-neutral on the move up, a source said.

Integer’s stock traded to a low of $90.64 and a high of $96.17 before closing at $93.24, an increase of 7.18%.

Stock was on the rise after the medical device company reported an earnings beat with earnings per share of $1.14 on revenue of $400 million versus estimates for earnings per share of $1 on revenue of $367.1 million.

Perficient’s earnings

Perficient’s 0.125% convertible notes due 2026 were lower on an outright and dollar-neutral basis as stock cratered following earnings.

The 0.125% notes sank 5 points outright with stock down more than 25%.

The notes traded down to 80 in the late afternoon.

While the notes contracted dollar-neutral on the move down, they held better than expected, a source said.

The notes were down about 0.5 point on hedge.

Perficient’s stock traded to a low of $64.99 and a high of $83 before closing at $66.99, a decrease of 26.06%.

The digital consultancy company was under pressure after an earnings miss with earnings per share of $1 on revenue of $231.11 million versus analyst expectations for earnings per share of $1.11 on revenue of $234.6 million.

Snap in focus

Snap’s convertible notes settled on Thursday with the notes largely unchanged after the large moves of the previous session.

The serial convertible note issuer’s 0.125% convertible notes due 2028 were active early in the session after taking a backseat to Snap’s shorter-duration notes the previous session.

The 0.125% notes were trading at 71.875 versus a stock price of $10.44 early in the session, according to a market source.

Snap’s stock remained under pressure on Thursday after a 14% drop the previous session.

Stock traded to a high of $10.92 and a low of $10.18 before closing the session at $10.33, a decrease of 3.73%.

Snap’s convertible notes fell outright the previous session, although most tranches were moving in line dollar-neutral.

However, the 0.25% convertible notes due 2025, the shortest duration in the debt stack, outperformed on hedge with the notes adding 1 point dollar-neutral as they fell to a 93-handle, a source said.

The 0.25% notes were not active on Thursday.

Mentioned in this article:

Integer Holdings Corp. NYSE: ITGR

Nio Inc. NYSE: NIO

Perficient Inc. Nasdaq: PRFT

Snap Inc. NYSE: SNAP

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