Morning Commentary: Fisker distressed convertibles gain; Enphase down outright

By Abigail W. Adams

Portland, Me., April 26 – It was another quiet start to the day in the convertibles secondary space on Wednesday with equity markets mixed as investors digested the latest slate of earnings.

While equity indexes launched the day strong with better-than-expected tech earnings boosting market sentiment, indexes quickly gave back their gains with the tech heavy Nasdaq the only one to remain in positive territory.

The Dow Jones industrial average was down 122 points, or 0.36%, the S&P 500 index was down 0.04%, the Nasdaq Composite index was up 0.82% and the Russell 2000 index was down 0.63% shortly before 11 a.m. ET.

While volume remained light with investment-grade issues continuing to dominate, topical and earnings-related news sparked activity in some off-the-run issues.

Fisker Inc.’s distressed 2.5% convertible notes due 2026 were bid up in active trade as stock soared following news European regulators had approved the sale of one of its vehicles.

The 2.5% notes climbed 4.5 points outright with stock up almost 20% early in the session.

The notes were changing hands at 43.5 with the yield about 30.375%, sources said.

There was $5 million in reported volume.

Fisker’s stock was trading at $5.86, an increase of 20.20%, shortly before 11 a.m. ET.

Stock soared after the company announced it would begin deliveries of its Ocean SUV following European regulatory approval.

Enphase Energy Inc.’s convertible notes also made large outright moves as stock tanked following earnings.

While the notes tumbled outright alongside stock, they were moving in line dollar-neutral, a source said.

“They’ve held up wonderfully,” the source said.

Enphase’s 0% convertible notes due 2026 sank 8 points outright with stock off more than 23%.

The 0% notes were marked at 97 bid, 97.75 offered versus a stock price of $170 early in the session, a source said.

Enphase’s stock was seen at $169.20, a decrease of 23.33%, shortly before 11 a.m. ET.

While Enphase beat on both the top and bottom line, its warning about sales growth dragged down the broader solar industry.

Enphase reported earnings per share of $1.37 versus analyst expectations for earnings of $1.22 and revenue of $726 million versus analyst expectations for $723 million.

However, the company also warned that sales growth would slow in the coming year with high interest rates and regulation changes in California making the switch to solar less cost-effective, Barrons reported.

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