Southwest Airlines, Snap convertible notes active; SoFi softer post-earnings

By Abigail W. Adams

Portland, Me., April 29 – The convertibles primary market was dormant on Monday with the upcoming Federal Open Market Committee expected to put a drag on issuance.

While sources expect the reactivation of the primary market in May, the amount of issuance in the pipeline remains a question market.

Meanwhile, the secondary space had a quiet start to the week with participants waiting on the convertible primary market to jumpstart activity.

Trading volumes have been light throughout April with accounts reluctant to sell with no new paper to replace it, a source said.

Equity indexes launched the week in the green as markets stare down the Federal Open Market Committee set to convene on Tuesday.

The Dow Jones industrial average closed Monday higher by 0.38%, the S&P 500 index closed up 0.32%, the Nasdaq Composite index closed 0.35% higher and the Russell 2000 index closed up 0.70%.

There was $64 million in reported volume about one hour into the session and $316 million on the tape in the late afternoon.

While the market was quiet, high-grade names and earnings-related news continued to drive activity.

Southwest Airlines Co.’s 1.25% convertible notes due May 1, 2025 (Baa1/BBB) remained active with the notes lower outright after falling last Friday on disappointing earnings.

Snap Inc.’s convertible notes remained active after a large post-earnings bump on Friday.

SoFi Technologies Inc.’s 1.25% convertible notes due 2029 sank outright and were soft on hedge as stock sold off on weak guidance.

Southwest lower

Southwest’s 1.25% convertible notes due May 1, 2025 remained active after last Friday’s earnings release with the notes continuing to move lower outright.

The 1.25% notes were trading at 98.75 versus a stock price of $26.62 early in the session, according to a market source.

They were trading at 98.875 in the late afternoon.

While the notes have dropped about 4 points outright since reporting earnings on Friday, they were flat dollar-neutral.

The notes’ short duration and high premium leave little room for a large move on hedge, a source said.

There was $11 million in reported volume.

Southwest’s stock traded to a low of $26.33 and a high of $26.94 before closing the day at $26.84, a decrease of 0.70%.

Snap active

Snap’s convertible notes remained active on Monday after a large post-earnings bump on Friday.

The 0.125% convertible notes due 2028 were slightly softer in active trade.

They were trading at 78.375 versus a stock price of $14.72 in the late afternoon, according to a market source.

The yield was about 6.6%.

There was $13 million in reported volume.

Snap’s 0.75% convertible notes due 2026 were largely unchanged.

The notes were wrapped around 103 versus a stock price of $14.75 in the late afternoon.

There was $6 million in reported volume.

Snap stock traded to a low of $14.03 and a high of $14.87 before closing the day at $14.49, a decrease of 0.41%.

The convertible notes made large gains in heavy volume on Friday as stock soared 27% after a large earnings beat.

SoFi soft

SoFi’s 1.25% convertible notes due 2029 sank outright and came in on hedge as stock dropped after the company reported earnings.

The 1.25% notes were down 5.5 points outright with stock off more than 9%.

The notes were trading at 96.75 versus a stock price of $7.16 early in the session, according to a market source.

They were trading at 96.375 in the late afternoon.

The notes came in slightly on the stock’s move down, a source said.

SoFi’s stock traded to a low of $7 and a high of $7.45 before closing the day at $7.04, a decrease of 10.48%.

While the fintech company posted a large earnings beat, disappointing guidance triggered a sell-off in stock.

SoFi reported earnings per share of 3 cents versus the breakeven expected. Revenue was $581 million versus analyst expectations for revenue of $560 million.

However, SoFi’s second-quarter revenue forecasts of $555 million to $565 million fell well short of analyst expectations for revenue of $580 million.

Mentioned in this article:

Snap Inc. NYSE: SNAP

SoFi Technologies Inc. Nasdaq: SOFI

Southwest Airlines Co. NYSE: LUV

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