Convertibles secondary quiet as equities sell off; Sea in focus; BofA synthetic active

By Abigail W. Adams

Portland, Me., Sept. 20 – It was a slow start to the week in the convertibles secondary space with many on the sidelines on a brutal day for equities.

While equities bounced off their lows into the close, the Dow Jones industrial average closed the day down 614 points, or 1.78%, the S&P 500 index closed down 1.7%, the Nasdaq Composite closed down 2.19% and the Russell 2000 index closed down 2.55%.

Fear of contagion from a default on China Evergrande Group’s debt and an upcoming Federal Reserve meeting were weighing on risk sentiment on Monday.

However, early week sell-offs tend to be overdone, a source said, and many were waiting on the sidelines before making a move.

There was $62 million in reported convertibles trading volume a little over one hour into Monday’s session and $326 million on the tape heading into the market close.

Sea Ltd.’s 0.25% convertible notes due 2026 were the most active issue of the day with the notes coming in alongside the company’s equity.

Some off-the-run names were also active during Monday’s session.

BofA Finance LLC’s 0.25% cash-settled equity-linked notes due 2023 tied to Voya Financial, Inc. made an appearance on the tape with the notes down on an outright basis.

Chegg Inc.’s 0.125% convertible notes due 2025 were also trading off in decent volume.

Sea in focus

Sea’s 0.25% convertible notes due 2026 were the most actively traded issue during Monday’s session with the notes giving back some of their outright gains with the company’s equity under pressure.

The 0.25% convertible notes were changing hands at 102.875 versus an equity price of $335.10 early in the session.

They continued to trend lower as the session progressed and were seen at 101.25 versus an equity price of $322.86 in the late afternoon.

There was about $26 million in reported trading volume.

Sea’s American Depositary Shares traded to a high of $335.50 and a low of $321.19 before closing the day at $329.62, a decrease of 3%.

The Singapore-based global consumer internet company’s ADSs may take a hit if China Evergrande Group’s debt default sparks a broad sell-off in Asian markets, a source said.

BofA active

BofA’s 0.25% cash-settled equity-linked notes due 2023 tied to Voya Financial were active on an otherwise slow day in the secondary space.

The 0.25% notes were changing hands just shy of 106 versus an equity price of $59.94 in the late afternoon.

There was about $9 million in reported volume.

Voya’s stock traded to a low of $59.72 and a high of $60.91 before closing the day at $60.46, a decrease of 2.47%.

The 0.25% notes rarely trade. However, there were some large prints around the 108 level earlier in the month, according to Trace data.

Chegg down outright

Chegg’s 0.125% convertible notes due 2026 were trading down on an outright basis as stock dropped during Monday’s session.

The 0.125% notes were down about 10 points outright with stock off more than 5%.

They were changing hands at 153.375 versus a stock price of $73.44.

There was about $8 million in reported volume.

Chegg’s stock traded to a high of $77.22 and a low of $73.15 before closing the day at $73.97, a decrease of 5.47%.

In addition to the broad sell-off on Monday, news broke last week that Pearson Education was suing Chegg for copyright infringement.

The suit alleges that Chegg, an education technology company, was selling the answers to Pearson’s end-of-chapter homework questions.

Mentioned in this article:

Chegg Inc. NYSE: CHGG

Sea Ltd. NYSE: SE

Voya Financial, Inc. NYSE: VOYA

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.