Sea convertibles in focus, trade higher; Datadog, Cloudflare notes gain outright

By Abigail W. Adams

Portland, Me., Oct. 13 – The convertibles secondary space continued to see an uptick of activity on Wednesday with equity markets mixed following the latest Consumer Price Index report and Federal Reserve minute notes detailing the discussion around bond tapering.

Major indexes continued to waver between gains and losses with the exception of the Nasdaq Composite, which remained in the green for the duration of Wednesday’s session.

The Dow Jones industrial average closed the day down 8.56 points, or 0.02%, the S&P 500 index closed the day up 0.23%, the Nasdaq Composite closed the day up 0.59%, and the Russell 2000 index closed the day up 0.10%.

There was $127 million in reported volume a little over one hour into the session and $600 million in reported volume heading into the market close.

Sea Ltd.’s 0.25% convertible notes due 2026 again topped the volume charts with the notes hitting their highest outright level since pricing in early September.

Datadog Inc.’s 0.125% convertible notes due 2025 were also active as stock broke out to a new 52-week high on a strong day for cybersecurity companies.

Cloudflare Inc.’s 0% convertible notes due 2026 also continued to gain outright as stock continued to set a new 52-week high, as it has each day over the week.

Opendoor Technologies Inc.’s 0.25% convertible notes due 2026 also remained active with the company’s stock described as “unstoppable,” despite the volatility in equities.

The convertibles secondary space has remained firm over the past two weeks as equities have swung wildly on a daily basis.

“Every time it seems like it’s going to get heavy, it’s better to buy,” a source said. “It seems like there are more lifts than hits.”

Recent deals have performed well with all but 2 of the 14 deals that priced in September expanded dollar-neutral, another source said.

Sea gains again

Sea’s 0.25% convertible notes due 2026 remained in focus in the secondary space with the notes continuing to gain alongside the company’s equity.

The 0.25% notes were up 3 points as equity jumped more than 7%.

The notes were changing hands at 103.5 versus an equity price of $341 early in the session, according to a market source.

They rose to trade at 105 versus an equity price of $348 in the late afternoon.

It was the highest outright level for the notes since the tech conglomerate priced the $2.875 billion issue in early September.

There was more than $56 million in reported volume.

Sea’s American Depositary Shares traded to a high of $251.68 and a low of $324.50 before closing the day at $349.35, an increase of 7.52%.

Sea’s equity price on Wednesday is also the highest it has been since the notes priced.

Cybersecurity in focus

Datadog’s 0.125% convertible notes due 2025 and Cloudflare’s 0% convertible notes due 2026 were active and making large gains on an outright basis as both companies’ stocks hit new 52-week highs.

Datadog’s 0.125% notes jumped more than 10 points outright.

The high-dollar price bonds were changing hands at 178.375 versus a stock price of $155.03 in the late afternoon.

There was $14 million in reported volume.

Datadog’s stock traded to a low of $146.36 and a new 52-week high of $156.80 before closing the day at $155.89, an increase of 7.07%.

Cloudflare’s 0% convertible notes due 2026 also continued to gain on an outright basis as stock again hit a new 52-week high, as it has everyday over the past week.

The 0% convertible notes jumped another 3 points outright to trade at 111 in the late afternoon.

Cloudflare’s stock traded to a low of $151.19 and a high of $159.47 before closing the day at $159.43, an increase of 5.65%.

Wednesday marked a strong day for the equity of cybersecurity companies as world leaders convened at a virtual meeting hosted by the White House on the threat posed by ransomware.

Opendoor active

Opendoor Technologies’ 0.25% convertible notes due 2026 remained active on Wednesday with the notes continuing their upward momentum.

The 0.25% convertible notes were up another 1 point outright.

They were changing hands at 137.5 versus a stock price of $23.21 early in the session. They remained on a 137-handle heading in to the afternoon.

While Opendoor’s stock opened the day in the red, it erased its losses as the session progressed.

Stock traded to a low of $22.36 and a high of $23.56 before closing the day at $23.49, an increase of 1.03%.

While in the red early Wednesday, Opendoor’s stock has been “unstoppable” recently, a source said.

Stock has skyrocketed more than 30% over the past month.

The convertible notes initially struggled after the online real estate company priced the $977.5 million issue in mid-August.

The notes were briefly below par but have since “gone straight to the moon,” a source said.

Mentioned in this article:

Cloudflare Inc. NYSE: NET

Datadog Inc. Nasdaq: DDOG

Opendoor Technologies Inc. Nasdaq: OPEN

Sea Ltd. NYSE: SE

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