Morning Commentary: Cloudflare convertible notes jump on earnings

By Abigail W. Adams

Portland, Me., Feb. 9 – The convertibles secondary space was active early Friday with earnings-related volatility continuing to drive volume in the space despite a muted open for equity markets.

Equity indexes were either side of unchanged as the latest piece of inflationary data did little to move markets.

The annual Consumer Price Index revisions released early Friday came in largely as expected with inflationary pressures decreasing but not by enough to renew market hope for a March rate cut, sources said.

The Dow Jones industrial average was down 80 points, or 0.21%, the S&P 500 index was up 0.30%, the Nasdaq Composite index was up 0.86% and the Russell 2000 index was up 0.47% shortly before 11 a.m. ET.

There was $100 million in reported volume about one hour into the session with Cloudflare Inc.’s 0% convertible notes due 2026 dominating the tape.

Cloudflare’s 0% convertible notes jumped outright as stock surged after an earnings beat.

The 0% notes jumped 6 points with stock up more than 20%.

The notes were trading just south of 96.5 versus a stock price of $111.61 early in the session, according to a market source.

There was $22 million in reported volume.

Cloudflare’s stock was trading at $110.78, an increase of 22.59%, shortly before 11 a.m. ET.

Stock surged after the cyber-security company reported a large earnings beat and issued upbeat guidance.

Cloudflare reported earnings per share of 15 cents versus the 12 cents expected and revenue of $362.47 million versus the $353 million expected.

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