Cutera soars; Enphase down outright, up on hedge; Li Auto rises; 3D Systems active

By Abigail W. Adams

Portland, Me., July 28 – The convertibles secondary space saw a quiet close to the week as equity markets resumed their rally after the surprise reversal of the previous session.

Markets responded favorably to the Bank of Japan’s surprise policy shift to give more flexibility to its bond yield control program, a sign the country was moving away from stimulus and normalizing its behavior relative to other central banks.

While mixed earnings may have caused some weakness in certain areas, the resiliency of the economy, which has shown few signs of a looming recession, was again buoying market sentiment, a source said.

The Dow Jones industrial average closed Friday up 177 points, or 0.50%, the S&P 500 index closed up 0.99%, the Nasdaq Composite index closed up 1.9% and the Russell 2000 index closed up 1.36%.

However, trading activity was at a whimper with $46 million in reported convertibles trading volume about one hour into the session and $350 million on the tape about one hour before the market close.

Earnings and topical news remained the drivers of activity in the space with no new paper to spark trading activity since late June.

Enphase Energy Inc.’s convertible notes were lower outright but up on hedge as stock took a hit following earnings.

Li Auto Inc.’s 0.25% convertible notes due 2028 continued to soar with the notes adding to the strong gains from the previous session with the company a benefactor of renewed investor interest in China’s EV industry.

While volume was light, Cutera Inc.’s convertible notes made large outright and dollar-neutral gains over the past two sessions after announcing a new CEO.

Topical news also spurred activity in 3D Systems Corp.’s 0% convertible notes due 2026, which improved after the company gave an update on its takeover attempt of Stratasys Ltd.

Enphase’s earnings

Enphase’s convertible notes were down outright but up on hedge as stock took a hit following lackluster earnings.

The 0% convertible notes due 2028 fell 3.5 points outright with stock off almost 8%. They were changing hands at 90.875 versus a stock price of $153 in the late afternoon.

The notes expanded about 0.5 point dollar-neutral on the move down, a source said.

Enphase’s 0% convertible notes due 2026 were down 2.625 points outright. They were changing hands at 91.875 versus a stock price of $153.81 in the late afternoon.

The notes also improved about 0.5 point dollar-neutral.

There was $5 million in reported volume.

Enphase’s stock traded to a low of $145.67 and a high of $154.91 before closing at $154.33, a decrease of 7.48%.

Stock was under pressure after the alternative energy management company posted mixed results and weak guidance.

Enphase beat on the bottom line with earnings per share of $1.47 versus analyst expectations for earnings per share of $1.27.

However, revenue was $711.12 million versus the $726 million expected.

Li Auto gains

Li Auto’s 0.25% convertible notes due 2028 were on the rise in heavy volume with the notes adding to the strong gains of the previous session.

The 0.25% convertible notes jumped 11 points outright with stock up 9%.

They were changing hands at 161.25 versus a stock price of $42.43 in the late afternoon.

The notes added 0.75 point on hedge after a 0.5 point gain the previous session.

There was $9 million in reported volume.

The Beijing-based EV maker’s American Depositary Shares traded to a low of $40.53 and a high of $42.83 before closing at $42.72, an increase of 9.57%.

Li Auto was riding a wave of renewed interest in China-domiciled companies, particularly EV makers, due to the promise of economic stimulus from the government.

Li Auto announced Thursday that it would report earnings on Tuesday, Aug. 8.

Cutera soars

Cutera’s convertible notes made large outright and dollar-neutral gains over the past two sessions after the company announced its next CEO.

While volume was light, Cutera’s 2.25% convertible notes due 2028 jumped 2 points outright to a 72-handle.

The notes were changing hands at 72.75 in the late afternoon.

The notes gained 5 points outright the previous session.

Cutera’s 4% convertible notes due 2029 traded up to 73.875 in the late afternoon.

They last traded on a 64-handle in mid-June, according to Trace data.

Cutera’s notes rose between 2 and 5 points dollar-neutral over the past two sessions, a source said.

Cutera’s stock traded to a low of $18.75 and a high of $21.41 before closing at $20.05, an increase of 9.8%.

Stock has jumped more than 20% over the past two sessions.

Cutera skyrocketed after the aesthetics company announced Taylor Harris as its new CEO. Harris has a track record of leading companies that have been acquired.

3D’s takeover

3D Systems’ 0% convertible notes due 2026 improved in early morning trade on Friday after the company gave an update on its proposed takeover of Stratasys.

The 0% convertible notes were changing hands at 77 versus a stock price of $9.03, according to a market source.

The yield was 8%.

There was $6 million in reported volume.

3D Systems’ stock traded to a low of $8.61 and a high of $9.09 before closing at $8.68, up 1.4%.

The notes saw some activity after the 3D printing company provided an update on its takeover attempt of Stratasys.

The company announced on Thursday that it had submitted a final proposal to buy all outstanding shares of Stratasys and finalize due diligence and merger agreement discussions by Aug. 4.

3D Systems’ acquisition offer for Stratasys came after Stratasys and Desktop Metal announced their $1.8 billion all-stock merger transaction in May.

3D Systems has offered to reimburse Desktop Metal for any termination fees incurred for ending their merger agreement with Stratasys.

Mentioned in this article:

3D Systems Corp. NYSE: DDD

Cutera Inc. Nasdaq: CUTR

Enphase Energy Inc. Nasdaq: ENPH

Li Auto Inc. Nasdaq: LI

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