Snap convertible notes jump on positive earnings; Southwest Airlines loses altitude

By Abigail W. Adams

Portland, Me., April 26 – The convertibles secondary space was quiet but firm on Friday as markets shook off the weakness of the previous session sparked by a softer-than-anticipated GDP print.

While the Consumer Price Expenditure report released Friday came in higher-than-expected on an annual basis, the monthly increase of 0.3% was in line with expectations.

Markets took the report as a positive with equity indexes surging and Treasury yields coming in.

The Dow Jones industrial average closed Friday up 154 points, or 0.40%, the S&P 500 index closed up 1.02%, the Nasdaq Composite index closed up 2.03% and the Russell 2000 index closed up 1.05%.

There was $68 million in reported volume about one hour into the session and $436 million on the tape about one hour before the market close.

High-grade names continued to dominate with the sector improved after seeing some selling pressure the previous session.

However, earnings dragged down Southwest Airlines Co.’s 1.25% convertible notes due May 1, 2025 (Baa1/BBB) with the notes again trading below par.

Earnings-related news also pushed Snap Inc.’s convertible notes to the center stage with the notes making strong gains as stock soared after a large earnings beat.

Southwest Airlines lower

Southwest Airlines’ 1.25% convertible notes due May 1, 2025 were lower in heavy volume with earnings results dragging down the notes as other high-grade notes firmed.

The 1.25% convertible notes were off about 3 points outright with stock down about 1%.

They were trading at 99.25 in the late afternoon, a source said.

There was $32 million in reported volume.

Southwest’s stock traded to a low of $26.73 and a high of $27.50 before closing at $27.03, off 0.84%.

Southwest reported losses per share of 36 cents versus analyst expectations for losses per share of 34 cents.

Revenue was $6.33 billion versus analyst expectations for revenue of $6.42 billion.

Oh Snap

Snap’s convertible notes jumped in active trade on Friday after a better-than-expected earnings report sent stock soaring.

Snap’s 0.125% convertible notes due 2028 jumped 2 points outright as stock soared more than 20%.

The notes were changing hands at 78 versus a stock price of $14.19 early in the session, according to a market source. They were seen at 78.125 in the late afternoon.

The yield tightened to about 6.7%.

There was $20 million in reported volume.

Snap’s more balanced 0.75% convertible notes due 2026 jumped 8 points outright with the notes trading above par for the first time since February.

The 0.75% convertible notes were trading at 101.25 versus a stock price of $14.36 early in the session, a source said. They continued to climb and were trading at 103 versus a stock price of $14.72 in the late afternoon.

There was $12 million in reported volume.

Snap’s stock traded to a low of $13.78 and a high of $14.94 before closing at $14.55, up 27.63%.

Stock soared after Snap posted a large earnings beat with earnings per share of 3 cents versus the losses per share of 5 cents expected.

Revenue was $1.19 billion versus the $1.12 billion expected.

The large bump post-earnings on Friday pared losses from the massive sell-off in stock after the company reported fourth-quarter earnings in February.

However, Snap’s stock is still down about 10% year to date.

Mentioned in this article:

Snap Inc. NYSE: SNAP

Southwest Airlines Co. NYSE: LUV

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