Morning Commentary: Varonis tanks outright, expands dollar-neutral on earnings miss

By Abigail W. Adams

Portland, Me., Nov. 1 – It was a quiet start to the day in the convertibles secondary space on Tuesday as equities wobbled between gains and losses ahead of rate day.

Equity indexes opened the day strong, but selling pressure quickly set in with indexes mixed shortly before 11 a.m. ET.

The Dow Jones industrial average was down 160 points, or 0.48%, the S&P 500 index was down 0.39%, the Nasdaq Composite index was down 0.46% and the Russell 2000 index was up 0.27%.

The market widely expects the Federal Open Market Committee to raise interest rates by 75 basis points on Wednesday; however, bets are still out on what to expect in December, sources said.

There was $76 million in reported volume about one hour into the session.

However, Twitter Inc.’s 0% convertible notes due 2026 accounted for nearly one-half of the total reported volume on the tape.

The notes continued to see heavy volume on ‘end of life’ trades with the notes to soon be taken out at par, a source said.

They continued to inch up to their takeout price and were changing hands at 99.875 early in the session.

There was $30 million in reported volume.

The space was largely quiet outside of Twitter; however, earnings related volatility continued to spark outsized moves in certain issues.

Varonis Systems Inc.’s 1.25% convertible notes due 2025 tanked outright but saw a large dollar-neutral expansion as stock got crushed following an earnings miss.

The 1.25% convertible notes fell 20 points outright with stock down 34%.

The convertibles were changing hands at 94.375 versus a stock price of $17.92 early in the session.

The notes expanded 3 points dollar-neutral.

There was $5 million in reported volume.

Varonis’ stock was seen at $17.82, a decrease of 33.41%, shortly before 11 a.m. ET.

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