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Morning Commentary: Convertibles space quiet as equities struggle; Redfin expands
By Abigail W. Adams
Portland, Me., Aug. 10 – The convertibles space stood poised to round the week out quietly with trading volume light as the Dow Jones industrial average opened Friday down 200 points.
While there was $60 million on the tape early in the session, it was scattered across a wide breadth of names, a market source said.
After dominating trading activity on Thursday, Rapid7 Inc.’s newly priced 1.25% convertible notes due 2023 were not seen trading early in Friday’s session.
The notes performed well on their Thursday debut, expanding 1.5 to 2 points dollar-neutral and trading up 3 to 3.75 points outright.
Redfin Corp.’s recently priced 1.75% convertible notes due 2023 were “getting crushed” outright, a market source said.
The notes were trading at their lowest outright levels since hitting the market in mid-July as the stock plummeted after the online real estate brokerage reported second-quarter earnings.
However, the notes expanded 2 points dollar-neutral.
The notes traded down to 92.5 early Friday after closing Thursday at 98. The stock was down more than 15% early Friday.
The notes should have traded down 8 points on a dollar-neutral basis but only moved down 6, a market source said.
“They did what they should do,” a market source said.
The move in the stock was not connected to the company’s credit.
Redfin’s stock dropped more than $3.50 after the company reported its second-quarter earnings.
While Redfin beat analyst expectations with earnings per share of 4 cents versus analyst expectations for 2 cents, it predicted lower revenue for the third quarter due to a weaker real estate market.
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