Wayfair, Chegg new convertible notes trade below par; Live Nation gains in secondary

By Abigail W. Adams

Portland, Me., Sept. 4 – Trading activity in the convertibles secondary space was light on Friday despite a volatile day for equities.

While the Dow Jones industrial average, S&P 500 index and Nasdaq all opened the day with large losses, they roared into the close.

While indexes significantly pared their losses, they all still closed the day in the red with the Dow down 159 points or 0.56%, the S&P down 0.81% and the Nasdaq down 1.27%.

There was $58 million in reported volume about one hour into the session and $336 million about one hour before the market close.

There continued to be large movements in the equities of convertible issuers.

“The (stock) movements are insanity,” a source said. “If you’re an outright guy, you’re feeling some pain, but the arb guys are loving the volatility.”

The convertibles market was holding firm in the face of the pullback in equities, which many saw as just a healthy correction, a source said.

However, the market will start to crack if there is continued stress on equities.

Several recent issues dropped below par during Friday’s session.

Wayfair Inc.’s recently priced 0.625% convertible notes due 2025 traded down to a 95-handle on Friday, although the notes improved dollar-neutral.

Chegg Inc.’s 0% convertible notes due 2026 also traded below par in intraday activity as stock saw wild swings during the session.

While equity indexes were soft on Friday, several travel and leisure names continued to gain on optimism surrounding a Covid-19 vaccine.

Live Nation Entertainment Inc.’s 2.5% convertible notes due 2023 were among the most actively traded issues in the secondary space with the notes continuing their upward momentum.

Wayfair below par

Wayfair’s new 0.625% convertible notes due 2025 traded down to their lowest outright level on Friday since pricing and closed the day well below par.

The notes traded down to 97.75 early Friday.

They continued to trend lower as the session progressed and were seen changing hands on a 95-handle in the mid-afternoon.

While down outright, the notes were improved dollar-neutral, a source said.

Wayfair’s 1.125% convertible notes due 2024 were also active with the notes down to 229 in the late afternoon.

Wayfair stock traded to a high of $271.96 and a low of $234.65 before closing the day at $260.94, a decrease of 5.34%.

In addition to the general sell-off in equities, Wayfair stock was tanking following a downgrade from a BofA Securities analyst.

Wayfair’s 0.625% convertible notes due 2025 traded below par on Thursday for the first time since pricing on Aug. 11, a source said.

The notes hit their highest outright level of 109 7/8 just last Wednesday.

Typically, there is a wave of buyers for new deals as they approach par after initially performing well, a source said.

However, if stock continues to crack, the premium in the name gets too high and buying interest dissipates.

Chegg volatile

Chegg’s recently priced 0% convertible notes due 2026 were volatile on Friday as its stock saw large swings.

The 0% notes traded down to a 97-handle in intraday activity with stock down as much as 9%.

However, the notes stood poised to close the day at par as stock pared its losses.

The notes were moving largely in line with stock, a source said.

Chegg stock traded to a low of $63.52 and a high of $69.76 before closing the day at $67.94, a decrease of 2.8%.

The online textbook rental, tutoring, scholarship and internship matching company priced a $900 million issue of the 0% convertible notes on Aug. 18, with the greenshoe later exercised, lifting the total size of the issue to $1 billion.

Live Nation gains

Live Nation’s 2.5% convertible notes due 2023 were active on Friday with the upward momentum of the notes continuing.

The 2.5% notes gained a little more than 1 point outright to change hands at 115 in the late afternoon.

With more than $8 million on the tape, the notes were among the most actively traded during Friday’s session.

Live Nation stock traded to a high of $58.30 and a low of $56.03 before closing the day at $57.58, a decrease of 2.64%.

The notes have steadily gained on an outright and dollar-neutral basis over the past few weeks, a source said.

They were trading on a 105-handle at the beginning of August.

Mentioned in this article:

Chegg Inc. NYSE: CHGG

Live Nation Entertainment Inc. NYSE: LYV

Wayfair Inc. NYSE: W

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