Hybrid Vigor: Vol 2 Issue 10 "Baaaa!"

Dear Friends,

Anyone who’s read my first book (or even seen the cover) knows I have a rather cynical view of what motivates participants in financial markets. You see the desire to do something original and creative in precious few; you see the fear of being left behind in many.

Last week’s new Gogo convertible brought this to mind.  Somehow it seems like you rarely see just one convertible issuer in a given sector in a given time frame. For those old enough to remember, in the early 2000’s we got a deluge of zero-coupon issues from the oil service sector.  The first bonds—from now-fallen angel Transocean, if memory serves—were legitimately attractive.  Then other issuers with less compelling profiles came to market aiming for similar terms. It worked, until it didn’t.

So with Gogo’s deal, following hard upon Global Eagle’s issue from a few weeks earlier, we can now say that the in-flight online space (and yes, this is one of the few times that overused buzzword “space” seems right) is well represented in our market.  Who’s next?

One area that seems ripe for more issuance in the not-too-distant future is cybersecurity.  (Wow, is it a sign of the times that I didn’t even get a spell-check warning when I typed that word?)  Take a look at the exchange-traded fund HACK (disclosure: I own it).  A couple of the top components have convertibles outstanding.   Given the growth and importance of this sector, and the performance of the existing convertibles, shouldn’t we see more issuance soon? Bet on it.

This week, thanks to last week’s issuance and volatility, we have a number of new names in our regular Ugly 20 and HOCS 20 features.  We think you’ll find both of those particularly worth reading this time around. Also in this issue, along with our now-traditional On-Deck Circle, we have an insightful piece from Jeff Alton on well-known issuer SunPower. Speaking of betting (maybe I still haven’t fully removed myself from Las Vegas yet), we’ll bet you’ll learn a thing or two.


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