Earnings in focus; Super Micro, Global Payments, Norwegian under pressure; LivaNova up

By Abigail W. Adams

Portland, Me., May 1 – The convertibles primary market was dormant on Wednesday with the market poised for another paperless week.

However, the primary market is expected to reactivate in the week ahead as issuers exit earnings season blackouts and the Fed meeting fades from view.

Meanwhile, the convertibles secondary space saw a volatile session on Wednesday as equity indexes surged after the Federal Open Market Committee’s afternoon announcement and chair Jerome Powell’s press conference only to give back gains and turned mixed by market close.

The Fed held rates steady and gave little visibility on future rate cuts.

However, the market may have breathed an initial sigh of relief that rate hikes were not under consideration.

The Fed’s announcement that it was slowing its balance sheet run off was also welcome news to the market.

While indexes jumped over 1% following the announcement, selling pressure took hold into the close as the higher-for-longer rate reality sunk in.

The Dow Jones industrial average closed Wednesday up 87 points, or 0.23%, the S&P 500 index closed down 0.34%, the Nasdaq Composite index closed down 0.33% and the Russell 2000 index closed up 0.32%.

There was $80 million in reported convertible bond trading volume about one hour into the session and $435 million about one hour before the market close with earnings-related volatility continuing to spark large price movements in the space.

Super Micro Computer Inc.’s 0% convertible notes due 2029 were under pressure on an outright and dollar-neutral basis after reporting earnings.

Global Payments Inc.’s 1.5% convertible notes due 2031 (Baa3/BBB-) and NCL Corp. Ltd.’s exchangeable notes for Norwegian Cruise Line Holdings Ltd.’s stock were also under pressure post-earnings.

However, LivaNova plc’s 2.5% convertible notes due 2029 were on the rise on an outright and dollar-neutral basis as stock jumped following earnings.

Super Micro under pressure

Super Micro’s 0% convertible notes due 2029 sank outright and came in on hedge as stock plunged after earnings.

The 0% convertible notes sank 8 points outright to reapproach their all-time lows as stock dropped 15% early in the session.

The 0% notes were trading at 94.875 versus a stock price of $736.60 early but pared their losses as the session progressed, sources said.

The notes were trading at 97.125 versus a stock price of $746 in the late afternoon.

The convertibles contracted about 0.25 point dollar-neutral, a source said.

There was $37 million in reported volume.

Super Micro’s stock traded to a low of $700 and a high of $781.35 before closing at $738.30, down 14.03%.

Stock sank on mixed earnings with the company beating on the bottom line but falling short on the top.

Super Micro reported earnings of $6.65 per share versus the $5.57 per share expected.

Revenue was $3.85 billion versus the $3.9 billion expected.

Super Micro’s stock and convertible notes also plunged in mid-April when the information technology company did not pre-report numbers as it announced its earnings report release date.

The convertible notes also traded down to a 94-handle mid-April although they recovered outright and were wrapped around 103 heading into earnings.

While the notes have been volatile outright, they have largely moved in line on a dollar-neutral, or hedged, basis.

Global Payments drops

Global Payments’ 1.5% convertible notes “were down big,” after reporting earnings, a source said.

The 1.5% convertible notes sank about 5 points outright with stock down more than 10%.

They were trading at 95.625 versus a stock price of $109.58 in the late afternoon.

The notes contracted about 0.5 point on hedge, a source said.

There was $29 million in reported volume.

Global Payments’ stock traded to a low of $108.52 and a high of $122.12 before closing at $109.06, a decrease of 11.18%.

Stock dropped despite an earnings beat with the company warning of an uncertain economic outlook.

The fintech company reported earnings per share of $2.59 versus the $2.57 expected.

Revenue was $2.42 billion versus the $2.18 billion expected.

While the company beat expectations and maintained its forward guidance, stock dropped as the company warned of an uncertain economic outlook that could weigh on future earnings.

Norwegian sinks

Norwegian’s exchangeable notes sank alongside stock after the cruise line operator posted earnings.

The near dated 5.375% exchangeable notes due 2025 dropped 9 points outright with stock off more than 12%.

They were trading at 114.375 versus a stock price of $16.19 in the late afternoon, according to a market source.

The 1.125% exchangeable notes due 2027 dropped 3 points outright.

They were trading at 88.375 versus a stock price of $16.20 in the late afternoon.

There was $15 million in reported volume.

Norwegian’s stock traded to a low of $15.99 and a high of $18.09 before closing at $16.08, off 15.01%.

While Norwegian upped its forward guidance, stock sank after the company reported mixed earnings with expectations for the company high.

Norwegian reported earnings per share of 16 cents versus the 9 cents expected. However, revenue came up short with $2.19 billion versus the $2.23 billion expected.

LivaNova gains

While the majority of post-earnings moves from convertible issuers were to the downside on Wednesday, LivaNova was the exception with the 2.5% convertible notes due 2029 making strong outright and dollar-neutral gains post-earnings.

The 2.5% convertible notes jumped 5 points outright with stock up more than 10%.

They were trading at 111 versus a stock price of $61.84 in the late afternoon.

The notes added 0.5 point dollar-neutral on the move up, a source said.

There was $8 million in reported volume.

LivaNova’s stock traded to a low of $58.62 and a high of $63.21 before closing at $62.62, up 12.32%.

Stock jumped after the medical device company reported earnings per share of 73 cents versus the 49 cents expected.

Revenue was $295 million versus the $278 million expected.

Mentioned in this article:

Global Payments Inc. NYSE: GPN

LivaNova USA Inc. Nasdaq: LIVN

Norwegian Cruise Line Holdings Ltd. NYSE: NCLH

Super Micro Computer Inc. Nasdaq: SMCI

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