Convertibles secondary market tone sours; Okta notes active; Lyft falls outright

By Abigail W. Adams

Portland, Me., Sept. 29 – It was a red day in the convertibles secondary space with the market giving back its gains from the previous session as the rally in equities proved short-lived.

The surge in markets on Wednesday sparked by the Bank of England’s bond-buying intervention did little to quell the recession concerns that have dragged risk assets to multi-year and multi-decade lows.

The Dow Jones industrial average closed Thursday down 458 points, or 1.54%, the S&P 500 index closed down 2.11%, the Nasdaq Composite index closed down 2.84% and the Russell 2000 index closed down 2.35%.

“Where’s the bottom?” is the question that many are asking.

However, the impact of the jump in interest rates on corporate balance sheets is just beginning to be realized, a source said.

Trading volumes were muted amid the volatility with $70 million in reported volume about one hour into the session and $350 million on the tape about one hour before the market close.

Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) continued to dominate the tape although with little movement in price.

Lyft Inc.’s 1.5% convertible notes due 2025 saw heavy volume as stock saw outsized losses after an announced hiring freeze.

While weaker outright, the notes were moving in line dollar-neutral.

Okta Inc.’s convertible notes were also active on the tape although with little movement in price as the notes remained near their all-time lows.

Southwest dominates

Southwest’s 1.25% convertible notes due 2025 once again claimed the top spot on the volume charts – a position it held for much of the June/July market rout when trading volumes were thin.

While active, there was little movement in price with the notes trading down outright alongside stock.

The 1.25% notes were off 1 point outright with stock down 2%.

They were changing hands at 116.5 versus a stock price of $31.52 in the late afternoon.

There was $25 million in reported volume.

Southwest’s stock traded to a low of $31.40 and a high of $32.08 before closing the day at $31.64, a decrease of 2.47%.

Lyft lower

Lyft’s 1.5% convertible notes due 2025 saw heavy volume on Thursday as stock got pummeled after the company announced a hiring freeze.

The 1.5% notes were down about 0.625 point outright as stock plunged as much as 9% in intraday activity.

The notes were seen at 85.375 versus a stock price of $13.05 in the late afternoon.

The yield on the notes was 7.77%.

The high-premium notes move on a light delta and were moving in line dollar-neutral, a source said.

Lyft’s stock traded to a high of $14.26 and a low of $13.05 before closing the day at $13.48, a decrease of 7.03%.

Lyft announced post-close Wednesday that it was freezing hiring for the remainder of the year due to continued economic uncertainty.

Lyft’s stock was under pressure earlier in the week after a UBS analyst downgrade.

Okta active

Okta’s convertible notes were active on Thursday although with little movement in price.

The notes remained near their all-time lows as stock bucked the broader sell-off and added to the previous day’s gains.

The user authentication software company’s 0.375% notes due 2026 were wrapped around 78 with a yield of 7.25%, according to a market source.

There was $11 million in reported volume.

Okta’s 0.125% convertible notes due 2025 were changing hands at 83.5 versus a stock price of $54.89 early in the session.

They traded at 83.375 versus a stock price of $56.58 in the late afternoon.

The yield on the notes was about 6.4%.

Okta’s stock traded to a high of $57.10 and a low of $54.50 before closing the day at $56.80, an increase of 2.07%.

Mentioned in this article:

Lyft Inc. Nasdaq: LYFT

Okta Inc. Nasdaq: OKTA

Southwest Airlines Co. NYSE: LUV

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.