HYBRID VIGOR: VOL 3 ISSUE 37 "Hitting Bottom"

We’ve been publishing a list of ugly convertible bonds since the middle of 2014. So we know from ugly. But we haven’t seen many spectacles uglier than the presidential debate on Sunday night.

Usually it takes two to make something so awful. But while we try to keep Hybrid Vigor at least somewhat unbiased, consider that one of the participants was a seasoned politician, someone accustomed to running for and holding office, someone accustomed to debating. That individual had been party to plenty of contentious events but never anything so universally agreed to be sickening.

The other individual had never run for office.

You make the call.

Sadly, there are no winners. The only positive is that perhaps, just as falling stocks have to get washed out in order to recover, perhaps our political system needed to get all the sick out. Maybe that’s what’s happening now. Let’s hope.

Speaking of hope, it continues to percolate, however haltingly, for a return to active issuance in the convertible market. Market hints seem favorable—volatility trending upward since midsummer, Treasury yields hitting a multi-month high, and the Russell 2000 well ahead of the S&P 500 on the year. But we’ll see. One interesting spark could be the ongoing Salesforce-Twitter drama. If salesforce.com does indeed buy Twitter—and we know its leader wants to—it seems likely that a major convertible financing could be part of the picture, given the putative buyer’s past success with the asset class.  One could envision a part-cash, part-stock package, with a significant amount of the cash being raised through one or more new convertible bonds.  Either way, it will be interesting.

(This is the cover letter for the subscription-based weekly Hillside's Hybrid Vigor newsletter. For a complete copy, please contact John Anderson at + 1 (646) 712-9289 x 107).