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Morning Commentary: Redfin convertible notes in focus, contract following earnings
By Abigail W. Adams
Portland, Me., Feb. 18 – It was a quiet morning in the convertibles secondary space on Friday as equity indexes wavered between gains and losses ahead of the long weekend.
While indexes briefly entered into positive territory early in the session, the Dow Jones industrial average was down 69 points, or 0.20%, the S&P 500 index was down 0.31%, the Nasdaq Composite was down 0.81% and the Russell 2000 index was down 0.14% shortly before 11 a.m. ET.
However, it was “very quiet” in the convertibles secondary space amid the volatility with $56 million in reported volume about one hour into the session.
Redfin Corp.’s convertible notes were in focus as stock cratered post-earnings.
The Seattle-based real estate technology company’s 0.5% convertible notes due 2027 and 0% convertible notes due 2025 were down on an outright and dollar-neutral basis on the stock move.
The 0.5% convertible notes due 2027 fell 4.5 points outright to trade down to 76.
They were contracted about 1.5 points dollar-neutral.
The 0% convertible notes due 2025 sank 3 points outright to trade down to 71.
They also contracted about 1.5 points dollar-neutral on the move down.
While both convertible issues carry a high premium, they were trading on a 50% to 60% delta with volatility in the stock high, a source said.
Redfin’s stock traded down to $20.64, a decrease of 27.93%.
While the company beat on both the top and bottom lines, stock cratered as guidance missed expectations.
Redfin reported losses per share of 27 cents, which was narrower than the losses of 31 cents expected. Revenue was $643 million versus the $598 million expected.
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