Rivian convertible notes weaken; Insulet down outright, up on hedge amid Ozempic hit

By Abigail W. Adams

Portland, Me., Oct. 12 – It was a relatively quiet day in the convertibles secondary space on Thursday with markets volatile after the latest Consumer Price Index report.

Equity indices were mixed early with Treasuries soft as markets digested a hotter-than-expected headline inflationary reading while core CPI figures met expectations.

However, indices were dragged deep into the red mid-session with selling accelerating in Treasuries.

The market was again revising its rate hike expectations on the heels of the report with Treasury yields bouncing after plunging earlier in the week.

The Dow Jones industrial average closed Thursday down 174 points, or 0.51%, the S&P 500 index closed down 0.62%, the Nasdaq Composite index closed down 0.63% and the Russell 2000 index closed down 2.2%.

The 10-year Treasury yield jumped 13.7 basis points to 4.7%.

There was $43 million in reported convertibles trading volume about one hour into the session and $390 million on the tape about one hour before the market close.

Rivian Automotive Inc.’s 3.625% convertible notes due 2030 remained active with the notes weaker as stock wavered between gains and losses.

High-grade names remained active with American Water Capital Corp.’s 3.625% exchangeable senior notes due 2026 (Baa1/A) and Welltower Inc.’s 2.75% convertible notes due 2028 (Baa1/BBB+) seeing the heaviest volume of the session.

The notes improved early but began to leak as the session progressed.

Ozempic’s potential disruptive effect on Kidney failure and diabetes treatment continued to spark heavy selling in the equity of medical device, dialysis and diabetes management companies.

Insulet Corp.’s 0.375% convertible notes due 2026 were lower outright but improved on hedge as stock took a hit in the broad sell-off in the sector.

Recent issue Tetra Tech Inc.’s 2.25% convertible notes due 2028 were active early in the session with the notes moving lower after recently popping above par.

Rivian weaker

Rivian’s 3.625% convertible notes due 2030 were once again in the spotlight on Thursday with the notes weaker in heavy volume.

The 3.625% notes were down 1.5 points outright with stock either side of unchanged.

They were trading just shy of 103.5 versus a stock price of $19.29 in the late afternoon, according to a market source.

There was $19 million in reported volume.

Rivian’s stock traded to a low of $18.72 and a high of $19.89 before closing at $19.33, down 0.21%.

The 3.625% notes have been volatile since the $1.73 billion issue hit the aftermarket on Oct. 6 and have ricocheted between a 96-handle and a 105-handle.

However, the notes have seen only nominal losses on hedge, sources said.

The weakness in the name on Thursday may have been related to the recent exercise of the greenshoe.

High grade active

Secondary trading remained concentrated in high-grade names on Thursday with the notes strong early in the session but leaking as selling accelerated in Treasuries.

American Water’s 3.625% exchangeable notes due 2026 were down about 0.5 point outright in the late afternoon.

They were trading at 96.5 versus a stock price of $118.93, according to a market source.

The yield was about 5%.

There was $16 million in reported volume.

American Water’s stock traded to a high of $121.98 and a low of $117.89 before closing at $118.33, a decrease of 3.18%.

Welltower’s 2.75% convertible notes due 2028 were trading at 104.125 versus a stock price of $84.90 in the late afternoon.

There was $14 million in reported volume.

Welltower’s stock traded to a high of $85.41 and a low of $84.31 before closing at $85, off 0.93%.

Insulet lower outright

The potential disruptive effects of Ozempic on the treatment of kidney disease and diabetes continued to reverberate through markets with the equity of companies in the industry continuing to take a hit.

Insulet’s 0.375% convertible notes due 2026 were active as stock fell more than 5% in intraday activity.

They were trading at 91.125 versus a stock price of $128.17 in the late afternoon.

The notes expanded about 0.25 point dollar-neutral on the move down, a source said.

Insulet’s stock traded to a high of $134.53 and a low of $125.82 before closing at $127.77, a decrease of 4.26%.

The maker of insulin delivery system’s stock was at one time a high-flyer with stock trading near its 52-week high of $335 in May.

While the Ozempic news put further pressure on a stock that has been on a steady downtrend since Insulet’s last earnings report on Aug. 8, the market’s reaction seems overdone, a source said.

Tetra Tech trades early

Tetra Tech’s recent 2.25% convertible notes due 2028 were active early in the session with the notes giving back some outright gains from the previous two sessions.

The 2.25% convertible notes were off 0.5 point outright as stock wavered between gains and losses.

The notes were changing hands just shy of 102 early in the session, according to a market source.

There was $5 million in reported volume.

Tetra Tech’s stock traded to a low of $161.70 and a high of $166.34 before closing at $162.93, down 1.59%.

Tetra Tech’s 2.25% convertible notes have wavered between outright gains and losses since the $575 million issue hit the aftermarket in mid-August.

The notes sank to a 98-handle in early October but popped to a 102-handle over the past few sessions with stock up more than 5% on the week.

Mentioned in this article:

American Water Works Co., Inc. NYSE: AWK

Insulet Corp. Nasdaq: PODD

Rivian Automotive Inc. Nasdaq: RIVN

Tetra Tech Inc. Nasdaq: TTEK

Welltower Inc. NYSE: WELL

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