Wolfspeed convertible notes fall outright, mixed on swap; onsemi lower; Impinj drops

By Abigail W. Adams

Portland, Me., April 27 – The convertibles secondary space remained quiet on Thursday with investment-grade issues continuing to dominate the tape amid a surge in equities and mixed macro data.

While the tone in the market improved on a strong day for equities, earnings-related volatility pushed several outstanding issues into the spotlight, many which saw a strong move to the downside.

The Dow Jones industrial average closed Thursday up 524 points, or 1.57%, the S&P 500 index closed up 1.96%, the Nasdaq Composite index closed up 2.43% and the Russell 2000 index closed up 1.2%.

The surge in equities followed continued strong earnings from the bellwethers of tech.

However, market uncertainty remained high with macro data continuing to come in mixed.

While the GDP print was weaker than expected, causing some to cheer on an end to the Federal Reserve’s rate hike campaign, a hotter-than-expected Consumer Price Expenditure report caused an increase in bets for a May rate hike.

“People still don’t know,” a source said.

While the broader secondary space was strong, it was a heavy day for the semiconductor sector with Wolfspeed Inc. and Impinj Inc. leading losses for equity markets.

Wolfspeed’s three tranches of convertible notes tumbled outright but were mixed dollar-neutral as stock plunged following earnings and a warning from Tesla Inc. that it will have a reduced need for the chipmaker’s products.

Impinj’s 1.125% convertible notes due 2027 also plunged outright and contracted dollar-neutral following earnings.

onsemi’s 0.5% convertible notes due 2029 continued to set new outright lows in active trade amid pressure in the broader sector.

Wolfspeed mixed

Wolfspeed’s three tranches of convertible notes fell outright but were mixed on swap following earnings and a warning from Tesla that it will have a reduced need for the company’s products.

Wolfspeed’s 1.875% convertible notes due 2029 and 0.25% convertible notes due 2028 sank both outright and dollar-neutral as stock dived more than 20%.

The 1.875% convertible notes due 2029 sank 8 points outright.

They traded down to 74 in the late afternoon.

The notes contracted about 2.5 points dollar-neutral on the move down.

The notes were the most active in the capital structure and moved on a 50% to 60% hedge.

However, even those who played the notes with a heavier hedge saw losses, a source said.

The 0.25% convertible notes due 2028 also fell 8 points outright to close at 72.

They contracted about 1.625 points dollar-neutral, a source said.

However, while the 1.75% convertible notes due 2026 plunged outright, they expanded on the move down.

The 1.75% convertible notes sank 20 points outright to close just shy of 120.

However, they expanded about 0.5 point dollar-neutral on the move.

The notes were moving on an 80% hedge.

Wolfspeed’s stock traded to a low of $44.25 and a high of $51.82 before closing at $76, a decrease of 19.86%.

While Tesla “got it started,” the silicon-carbide chipmaker’s earnings were a cause for concern, a source said.

Tesla announced that its next generation cars will use less silicon-carbide on Wednesday, pressuring the chipmaker.

Wolfspeed also announced losses per share of 13 cents versus analyst expectations for losses of 15 cents and revenue of $228 million versus analyst expectations for revenue of $220 million.

While the earnings beat expectations, revenue guidance raised alarms.

Concern previously had been about the company’s expenditures. “Now revenue guidance is an issue,” a source said.

Impinj earnings

Impinj’s off-the-run 1.125% convertible notes due 2027 were active as the semiconductor company’s stock got slaughtered post-earnings.

The 1.125% convertible notes sank 36 points outright with stock off almost 40%.

The notes, which had been trading in the 140s leading into Thursday’s session, sank to 107.

They contracted 0.5 point dollar-neutral on the move down.

Impinj’s stock traded to a high of $99.50 and a low of $81.50 before closing at $82.47, a decrease of 39%.

Impinj reported mixed results with earnings per share of 30 cents versus analyst expectations for earnings per share of 33 cents.

Revenue was $86 million versus analyst expectations for $83.5 million.

However, forward guidance that came in well below expectations triggered a sell-off in the company’s stock.

onsemi’s new low

onsemi’s 0.5% convertible notes due 2029 continued to set new outright lows in active trade with the broader semiconductor sector under pressure.

The 0.5% notes fell 2 points outright with stock off another 2%.

They traded as low as 94.5 early in the session but pared their losses alongside stock to trade at 95.5 in the late afternoon.

onsemi’s stock traded to a low of $66.67 and a high of $70.08 before closing at $69.98, down 2.74%.

Mentioned in this article:

Impinj Inc. Nasdaq: PI

onsemi Nasdaq: ON

Wolfspeed Inc. NYSE: WOLF

© 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.