Morning Commentary: MicroStrategy cracks, new notes hit mid-80s; Super Micro lower

By Abigail W. Adams

Portland, Me., March 19 – While the convertibles primary market remained dormant early Tuesday, the secondary space was active with large stock swings sparking activity in several names.

Equity indexes were mixed early in the session with value stocks outperforming as Treasury yields crept higher as the Federal Open Market Committee convened.

The Dow Jones industrial average was up 132 points, or 0.34%, the S&P 500 index was down 0.11%, the Nasdaq Composite index was down 0.46% and the Russell 2000 index was down 0.39% shortly before 11 a.m. ET.

There was $156 million in reported volume about one hour into the session with several large movements in the space.

MicroStrategy Inc. continued to live up to its high vol. assumptions as stock plunged early Tuesday dragging its convertible notes along with it.

Super Micro Computer Inc.’s 0% convertible notes due 2029 were down outright with stock also taking a hit after the company announced a follow-on offering of 2 million shares.

MicroStrategy cracks

MicroStrategy continued to live up to its high vol. assumptions as stock plunged early Tuesday dragging its convertible notes along with it another 17% in early trade after a 15% drop the previous session.

The stock move sent the company’s most recently priced 0.875% convertible notes due 2031 tumbling 10 points outright.

They were wrapped around 86 early in the session, a source said.

There was $15 million in reported volume.

MicroStrategy’s 0.625% convertible notes due 2030 dropped 12 points outright.

They were changing hands at 111.25 versus a stock price of $1,288.56 early in the session.

MicroStrategy’s stock down traded to $1,268.08, a decrease of 15.45%, shortly before 11 a.m. ET.

MicroStrategy set a record and raised eyebrows when it re-tapped the convertible market with its $525 million offering of 0.875% convertible notes due 2031, which priced on March 14. A greenshoe exercise later pushed the deal size to $603.75 million.

The offering came about one week after the company priced $800 million of 0.625% convertible notes due 2030 on March 5.

The offerings were marketed with a vol. assumption of 50%, an abnormality for the market with vol. typically capped at 45%.

“They certainly earned it,” a source said.

Proceeds from both offerings were used to purchase Bitcoin with MicroStrategy announcing that it had purchased 9,245 Bitcoin for $623 million over the past week, adding to its previous purchase of 12,000 coins at an average price of $68,477 for about $822 million.

MicroStrategy now owns 214,246 Bitcoin.

Super Micro lower

Super Micro’s 0% convertible notes due 2029 fell outright as stock sank after the company announced a follow-on stock offering.

The 0% convertible notes were down 6 points outright with stock off more than 10%.

The notes were trading at 104.375 versus a stock price of $896 early in the session, according to a market source.

There was $11 million in reported volume.

Super Micro’s stock was trading at $896.28, a decrease of 10.26%, shortly before 11 a.m. ET.

The company announced plans to sell 2 million shares in a follow-on offering early Tuesday.

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