Convertibles secondary market quiet; 2U notes gain outright; Under Armour volatile

By Abigail W. Adams

Portland, Me., July 31 – The convertibles secondary space closed out July quietly with little on the tape.

There was $46 million in reported volume about one hour into the session and $385 million about one hour before the market close, sources said.

However, while quiet, the secondary space stood poised to close the first month of the third quarter on firm footing with the tech sector continuing to rocket higher following strong earnings from Apple, Amazon, Alphabet and Facebook.

End-of-month activity and earnings reports were the main drivers of trading activity during Friday’s session.

Education technology company 2U, Inc.’s 2.25% convertible notes due 2025 rose alongside stock following its second-quarter earnings report.

Under Armour Inc.’s 1.5% convertible notes due 2024 were volatile with the notes up significantly pre-market alongside stock but down substantially after the opening bell as stock sold off.

The 1.5% notes expanded on the move down, a source said.

2U’s earnings

2U’s 2.25% convertible notes jumped alongside stock following a large second-quarter earnings beat.

The 2.25% convertible notes gained more than 10 points outright to 178.5 with stock up over 6% early in the session.

The notes continued to rise alongside stock heading into the afternoon.

They were changing hands at 181.25 with stock up almost 8% in the late afternoon.

There was about $7 million on the tape by the late afternoon, according to a market source.

2U stock traded to a high of $48.23 and a low of $43.31 before closing the day at $47.10, an increase of 7.35%.

The education technology company beat on both the top and bottom lines in its second-quarter earnings report.

2U reported a loss per share of 34 cents versus analyst expectations for a loss per share of 44 cents.

Revenue was $182.69 million versus analyst expectations for revenue of $175.12 million.

Under Armour volatile

Under Armour’s 1.5% convertible notes due 2024 were volatile on Friday.

While the notes were up pre-market alongside stock, they sold off as stock tanked after the opening bell.

The notes were marked at 140 preopen with stock trading as high as $12.00.

However, they were changing hands at 119.75 in the late afternoon versus a stock price of $9.50.

“That was a big reversal,” a source said.

The 1.5% notes were expanding on the move down and were seen up 1.5 points dollar-neutral in the late afternoon.

While the notes were trading with an 80% delta heading into Friday’s session, the delta moved lower as the session progressed, a source said.

The clothing apparel company’s class C stock, which is linked to the convertible notes, traded as high as $10.65 and as low as $9.31 before closing Friday at $9.49, a decrease of 6.78%.

Under Armour beat expectations on both the top and bottom line in its second-quarter earnings report.

The company reported losses per share of 31 cents, which beat analyst expectations for losses of 41 cents.

Revenue was $707.6 million, which smashed expectations for revenue of $537 million.

However, Under Armour stock reversed course after it warned that revenue was expected to fall 20% to 25% in the third quarter, Bloomberg reported.

While the news had little impact on stock, Under Armour was also the subject of headlines on Monday after the company announced its founder and chief financial officer were facing an enforcement action from the Securities and Exchange Commission over allegations sales figures were misrepresented in 2017.

Mentioned in this article:

2U, Inc. Nasdaq: TWOU

Under Armour Inc. NYSE: UA

© 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.