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Morning Commentary: Global Blood convertible notes jump on takeout, add to Friday gains
By Abigail W. Adams
Portland, Me., Aug. 8 – It was a slow start to the week in the convertibles secondary space with volume light as equity indexes extended their gains from the previous week.
The Dow Jones industrial average was up 273 points, or 0.85%, the S&P 500 index was up 0.85%, the Nasdaq Composite index was up 1.17% and the Russell 2000 index was up 1.77% shortly before 11 a.m. ET.
While no deals were announced prior to the market open, sources expect some deals to surface in the coming week given the strength in equities.
Takeover news continued to jolt activity in the secondary space with Global Blood Therapeutics Inc. the latest convertible issuer to be the subject of an acquisition.
Global Blood Therapeutics’ 1.875% convertible notes due 2028 continued to add to their gains in high-volume activity following the formal announcement that Pfizer Inc. would acquire the biopharmaceutical company in an all-cash transaction.
The 1.875% convertible notes rose about 4 points outright to a 218-handle.
The notes were roughly unchanged dollar-neutral after skyrocketing on Friday following news that Pfizer and Global Blood Therapeutics were in advanced talks.
Global Blood’s stock was changing hands at $66.68, an increase of 4.44%, shortly before 11 a.m. ET.
The 1.875% convertible notes shot up more than 40 points to 214 on Friday as stock surged more than 30% following the report of the pending acquisition.
The notes’ rally over the past two sessions has largely accounted for the majority of profits to be made in their takeout, a source said.
However, they still may be small winners based on their current trading level, the source said.
Pfizer announced on Monday that it would acquire Global Blood for $68.50 per share in cash in a deal with a total enterprise value of $5.4 billion.
The notes will be taken out in the acquisition.
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