Convertibles secondary at half-mast; Coupa skyrockets on takeover report; ZTO rises

By Abigail W. Adams

Portland, Me., Nov. 23 – It was a quiet day in the convertibles secondary space with the market at half-mast heading into the Thanksgiving holiday in the United States.

After wobbling between positive and negative territory early in the session, equity indexes extended gains following the release of the Federal Open Market Committee meeting minute notes at 2 p.m. ET.

While markets responded favorably to a projected slowdown in rate increases, the minute notes yielded few surprises with the market widely anticipating a 50 basis point rate increase in December.

The Dow Jones industrial average closed Wednesday up 96 points, or 0.28%, the S&P 500 index closed up 0.59%, the Nasdaq Composite index closed up 0.99% and the Russell 2000 index closed up 0.17%.

There was $50 million in reported volume about one hour into the session and $209 million on the tape in the late afternoon.

“Anyone who wanted to do something already did it,” a source said.

While volume was light, topical and earnings-related news pushed some outstanding issues into the spotlight.

Coupa Software Inc.’s convertible notes were the surprise winners on Wednesday with stock halted mid-session after a double-digit surge following reports the company was in buyout talks with a private equity firm.

ZTO Express’ 1.5% convertible notes due 2027 were the major volume movers of the session with the notes gaining on an outright basis but largely unchanged dollar-neutral.

Coupa’s takeover

Coupa’s convertible notes were the surprise winners of Wednesday’s session following news the company was in buyout talks with Vista Equity Partners.

Stock was halted mid-session after a double-digit spike as the report, published by Bloomberg, hit the market.

When trading resumed, Coupa’s 0.375% convertible notes due 2026 jumped 10 points outright.

The notes traded up to an 88-handle but came down with stock to close the day wrapped around 85.

The high-premium convertible notes trade on a light delta and expanded several points on the move, a source said.

Coupa’s 0.125% convertible notes due 2025 were not active on Wednesday following the report.

The notes traded on an 84-handle early in the session but were expected to climb to 93 based on the stock move, a source said.

They were also expected to gain dollar-neutral on the move up.

Coupa’s stock opened Wednesday’s session at $45.76 and was trading on a $47-handle until about 1:30 p.m. ET when news of the potential takeover hit the market.

The stock surge triggered a volatility halt with Coupa ending the day up more than 30%.

Stock traded to a low of $45 and a high of $62.67 before closing the day at $58.93, an increase of 28.89%.

Bloomberg reported that Vista was in early phase acquisition talks with Coupa with other suitors also potentially interested in the spend management software company.

ZTO’s earnings

ZTO Express was among the most actively traded issues of Wednesday’s session with the notes gaining outright but largely unchanged dollar-neutral after a positive earnings report.

The notes gained about 2 points outright with the company’s equity up about 4%.

The convertibles were marked at 95.75 bid, 96 offered in early trade, a source said.

They continued to gain alongside stock as the session progressed with the notes trading as high as 97.375.

However, the notes were moving in line on a dollar-neutral, or hedged, basis.

ZTO’s American Depositary Shares traded to a low of $22.37 and a high of $23.62 before closing the day at $22.90, an increase of 2.6%.

The Shanghai-based express delivery service reported a large earnings beat after the market close on Tuesday with earnings per share of $2.34 versus the $1.92 expected.

Revenue was $8.94 billion versus the $8.95 billion expected.

Mentioned in this article:

Coupa Software Inc. Nasdaq: COUP

ZTO Express NYSE: ZTO

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