Morning Commentary: Trading slows; Farfetch convertibles down; Welltower paper declines

By Cristal Cody

Tupelo, Miss., Dec. 20 – Secondary trading in the convertible bonds space slowed early Wednesday but remained active with more than $76 million of bonds traded an hour into the session, a source reported.

Activity was down from more than $111 million of volume reported around the same period on Tuesday but still up from the under $75 million of supply traded early Monday.

Market tone stayed positive over the morning with stock indices all improving.

The S&P 500 index rose 0.05%, the Dow Jones industrial average increased 0.07%, the Nasdaq added 0.22% and the Russell 2000 index moved up 0.73%.

Investment-grade convertible paper was leading supply over the morning, a source said.

Welltower Inc.’s 2.75% convertible notes due 2028 (Baa1/BBB+) gave back nearly ¾ point on more than $5 million of trading an hour after the market opened.

Elsewhere, Farfetch Ltd.’s 3.75% convertible notes due 2027 declined early Wednesday, but liquidity was very thin as traders try to absorb all the news out on the company.

“Basically, the company’s just gone belly-up,” a source said. “There wasn’t much volume this morning.”

Welltower softens

Welltower’s 2.75% convertible notes due 2028 (Baa1/BBB+) gave back nearly ¾ point to a print of 110.31 versus an equity price of $90.02 on more than $5 million of trading volume early Wednesday, a source said.

On Monday, the company’s outlook was reportedly raised to overweight from neutral by JPMorgan Chase & Co.

Welltower’s stock was trading marginally softer after hitting a 52-week high of $93.42 on Dec. 14.

Shares slipped 0.22% to $90.10 in light activity early Wednesday.

Fartech lower

Farfetch’s 3.75% convertible notes due 2027 fell 0.625 point to 1.5 points on less than $1 million of volume an hour into the session, a source said.

Farfetch’s stock ended trading Friday before it was suspended at 64 cents. Shares had traded from 53 cents to $8.02 over the past 52 weeks.

The New York Stock Exchange announced Tuesday that it will proceed to delist the company’s class A ordinary shares after Farfetch’s 6-K regulatory filing on Monday that a subsidiary entered into agreements to obtain bridge financing and to facilitate a process to dispose of all of the company’s assets.

The company further disclosed that after the assets are sold, it expects that there will be no value remaining for the holders of its class A and B ordinary shares and its convertible notes.

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