Morning Commentary: Snap convertible notes drop outright post-earnings; DISH improves

By Abigail W. Adams

Portland, Me., July 26 – While the markets’ focus on Wednesday will be firmly on the Fed, earnings and topical news were the drivers of activity in the convertibles secondary space early in the session.

Equity indexes were mixed early Wednesday after lackluster earnings and growth forecasts from the bellwethers of tech and with the Federal Open Market Committee’s rate announcement and chair Jerome Powell’s press conference set for the afternoon.

The Dow Jones industrial average was down 8 points, or 0.02%, the S&P 500 index was down 0.22%, the Nasdaq Composite index was down 0.34% and the Russell 2000 index was up 0.48% shortly before 11 a.m. ET.

There was $73 million in reported convertibles trading volume about one hour into the session with Snap Inc.’s convertible notes and DISH Network Corp.’s convertible notes (B3/CCC-) active.

While Snap’s convertible notes fell outright as stock dropped double digits post-earnings, DISH’s convertible notes improved after unveiling its long-speculated plan to sell wireless service through Amazon.

Snap’s earnings

Snap’s convertible notes fell outright as stock tanked double digits after another disappointing earnings report.

Snap’s 0.75% convertible notes due 2026 were down about 4.5 points outright with stock off almost 20%.

The notes were changing hands at 91.125 versus a stock price of $10.27 early in the session, according to a market source.

The notes move on a delta of about 54%.

There was $5 million in reported volume.

Snap’s 0.25% convertible notes due 2025 also fell about 4.5 points outright.

They were seen at 93.875 versus a stock price of $10.07 early in the session.

The theoretical delta on the notes is about 40%, a source said.

Snap’s stock was trading at $10.12, a decrease of 19.10%, shortly before 11 a.m. ET.

While Snap’s earnings beat on both the top and bottom lines, weak guidance sparked a sell-off in stock.

Snap reported losses per share of 2 cents versus analyst expectations for losses per share of 4 cents.

Revenue was $1.07 billion versus the $1.06 billion expected.

Snap pegged third-quarter revenue between $1.07 billion to $1.13 billion versus the $1.13 billion expected.

DISH improves

DISH’s convertible notes improved in early trade after the struggling credit announced its long-speculated plans to sell its wireless service through Amazon.

DISH’s 0% convertible notes due 2025 gained about 0.75 point outright.

The notes were changing hands at 60.25 early in the session with the yield about 22.5%, according to a market source.

There was $5 million in reported volume.

DISH’s 3.375% convertible notes due 2026 popped 1.75 points outright to trade up to a 56-handle.

They were trading at 56.625 early in the session with a yield of 24.375%.

DISH’s stock surged in premarket trading but sank into negative territory after the open as market players digested the announcement.

DISH’s stock was at $7.32, a decrease of 6.8%, shortly before 11 a.m. ET.

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