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Morning Commentary: Zscaler notes down outright post earnings, expand dollar-neutral
By Abigail W. Adams
Portland, Me., Dec. 2 – It was a quiet morning in the convertibles secondary space with equity markets in the red after a better-than-expected U.S. non-farm payroll report again called into question the dovish pivot rally sparked by Federal Reserve chair Jerome Powell’s Wednesday comments.
The Dow Jones industrial average was down 178 points, or 0.52%, the S&P 500 index was down 0.80%, the Nasdaq Composite index was down 1.05% and the Russell 2000 index was down 0.21% shortly before 11 a.m. ET.
There was $40 million in reported volume about one hour into the session with Zscaler Inc.’s 0.125% convertible notes due 2025 in focus.
The 0.125% convertible notes were down outright but up dollar-neutral as stock tanked post-earnings.
The notes were down 6.5 points outright with stock off more than 10%.
The convertibles were changing hands at 112 versus a stock price of $127.47 in early trading.
They expanded on the move down.
The theoretical delta on the notes is 75%, a source said.
Zscaler’s stock traded down to $129.66, a decrease of 10.27%, shortly before 11 a.m. ET.
Stock fell despite an earnings beat with the cybersecurity firm reporting earnings per share of 29 cents versus analyst expectations of earnings per share of 26 cents.
Revenue was $355.55 million versus the $340.79 million expected.
Zscaler’s stock and convertible notes have been volatile over the past two session.
The notes were under pressure early Wednesday after disappointing earnings from an industry peer but pared their losses in Wednesday’s post-Powell rally and continued to make strong gains on Thursday.
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