ViacomCBS carnage continues; iQIYI convertible drops; MicroStrategy, Beyond Meat better

By Abigail W. Adams

Portland, Me., March 26 – The convertibles secondary space saw a quiet end to another volatile week with carnage on the new issue front continuing.

While the Nasdaq composite briefly dipped into negative territory, equity markets roared into the close with the Dow Jones industrial average closing the day up 453 points, or 1.39%, the S&P 500 index closing the day up 1.66% and the Nasdaq ending the day up 1.24%.

However, the pain intensified for ViacomCBS Inc.’s 5.75% series A mandatory convertible preferred stock, which was trading almost 40 points below its issue price.

There was also heavy selling in the equity of some convertible issuers, particularly the ADSs of China-based companies.

iQIYI Inc.’s convertible notes were active and dropping on an outright and dollar-neutral basis as stock sank more than 22% during Friday’s session.

While the notes remained severely under water, Beyond Meat Inc.’s 0% convertible notes due 2027 and MicroStrategy Inc.’s 0% convertible notes due 2027 were nominally improved in early trading.

ViacomCBS sinks

The carnage in ViacomCBS’ 5.75% series A mandatory convertible preferred stock continued on Friday with the preferred stock sinking almost 40 points below its issue price.

The par-of-$100 preferred stock was changing hands at 59.875 bid, 60.875 offered versus a stock price of $43.00 in the late afternoon.

“I can’t even look at it,” a source said.

ViacomCBS’ stock traded to a high of $66.27 and a low of $39.81 before closing the day at $48.23, a decrease of 27.31%.

ViacomCBS priced a $1 billion issue of the 5.75% mandatory convertible preferred stock at par on Tuesday.

The convertible preferred stock priced concurrently with a secondary offering of 20 million shares, which priced at $85.00.

The preferred stock and common stock have plummeted since hitting the secondary space on Wednesday.

iQIYI for sale

iQIYI’s convertible notes were also struggling as stock dropped as much as 22% in intraday activity with large blocks up for sale.

The Beijing-based online media company’s 4% convertible notes due 2026 dropped more than 20 points outright.

The 4% notes were changing hands at 115 early in Friday’s session but dropped to 101.875 as stock cracked in the afternoon.

They were contracted 0.5 point dollar-neutral, a source said.

There was more than $25 million in reported volume.

iQIYI’s 2% convertible notes due 2025 closed Friday at 89.875.

They were changing hands at 110 at the start of the week.

iQIYI’s 3.75% convertible notes due 2023 dropped more than 17 points outright to close Friday at 95.

The 2% and 3.75% convertible notes each saw about $16 million in reported volume.

iQIYI’s ADSs traded to a high of $21.68 and a low of $14.60 before closing the day at $17.43, a decrease of 13.20%.

There were huge blocks of the company’s ADSs for sale, leading to speculation that a large holder such as SoftBank was liquidating its position, a source said.

The ADRs of several China-based companies saw heavy selling on Friday and have been under pressure throughout the week.

The Securities and Exchange Commission began implementing a law this past week that would enable U.S. regulators to review the financial audits of overseas companies.

iQIYI was the subject of a short seller report by Wolfpack Research in April 2020, which accused the company of fraud.

Improved

While the notes remained severely underwater, Beyond Meat’s 0% convertible notes due 2027 and MicroStrategy’s 0% convertible notes due 2027 saw nominal improvement on Friday.

Beyond Meat’s 0% convertible notes due 2027 were changing hands at 94.25 bid, 94.75 offered early in the session.

They closed Friday at 94.375.

The notes were up 0.375 point on a dollar-neutral, or hedged, basis, a source said.

The notes traded as low as 93.625 the previous session.

Beyond Meat’s stock traded to a high of $132.19 and a low of $126.90 before closing the day largely flat at $129.71, a decrease of 0.015%.

The maker of a plant-based meat substitute priced a $1.15 billion issue of the 0% notes in early March.

MicroStrategy’s 0% convertible notes due 2027 were also making nominal improvements.

The 0% notes were changing hands at 81.25 bid, 82 offered early in the session.

However, they came in as the session progressed to close the day just shy of 81.

The notes were up 0.375 point on a dollar-neutral basis early in the session.

“It’s an $80 bond; it’s not going to move too much,” a source said.

MicroStrategy’s stock traded to a high of $642.30 and a low of $600.38 before closing the day at $624, an increase of 0.5%.

The company priced a $1.05 billion issue of the 0% notes in mid-February.

Mentioned in this article:

Beyond Meat Inc. Nasdaq: BYND

iQIYI Inc. Nasdaq: IQ

MicroStrategy Inc. Nasdaq: MSTR

ViacomCBS Inc. Nasdaq: VIAC

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