Morning Commentary: Avalara convertible notes up on buyout approval; Splunk jumps

By Abigail W. Adams

Portland, Me., Oct. 17 – It was a relatively active morning in the convertibles secondary space on Monday as equities ripped to the upside in another dramatic reversal of market sentiment.

The Dow Jones industrial average was up 442 points, or 1.49%, the S&P 500 index was up 2.31%, the Nasdaq Composite index was up 2.85% and the Russell 2000 index was up 2.69%% shortly before 11 a.m. ET.

“It’s risk-on today,” a source said.

There was $73 million in reported volume about one hour into the session with topical news driving trading activity.

Splunk Inc.’s 1.125% convertible notes due 2027 made large gains on an outright and dollar-neutral basis as stock surged following reports an activist investor had taken a large stake in the company.

Avalara Inc.’s 0.25% convertible notes due 2026 jumped after shareholders voted to approve its acquisition by Vista Equity Partners.

Splunk gains

Splunk’s 1.125% convertible notes due 2027 were making large gains in active trade early in the session as stock surged following news activist investor Starboard Value has a sizable stake in the company.

The 1.125% notes jumped 3.5 points outright with stock up almost 6%.

They were changing hands at 81.25 versus a stock price of $74.40 early in the session.

There was $10 million in reported volume.

Splunk’s stock was trading at $74.44, an increase of 6% shortly before 11 a.m. ET.

The software company’s stock jumped following news Starboard Value had amassed a stake of just under 5% in the company.

Avalara’s buyout

Avalara’s 0.25% convertible notes were trading up to their takeover potential following shareholder approval of the company’s takeover by private equity firm Vista Equity Partners.

The 0.25% convertible notes jumped more than 2.5 points outright on news of the approval.

They were changing hands at 99.25 early in the session.

There was $7 million in reported volume.

The notes were active and trading on a 97-handle heading into the shareholder vote.

While the notes were trading with a degree of certainty that the takeover would garner approval, there was an element of opposition with shareholder Altair US announcing its opposition to the merger, which it claimed undervalued the company.

Vista Equity Partners announced its acquisition of the tax software company for $93.50 per share in an all-cash transaction in early September.

The notes will be taken out at par in the transaction.

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