Lucid convertibles improve on strong day for EV makers; BridgeBio bounces off lows

By Abigail W. Adams

Portland, Me., Jan. 3 – It was a quiet start to the New Year in the convertibles secondary space as market players prepare for 2022.

While volume was light, the secondary space was firm as equities launched the year by hitting fresh heights.

After wavering early in the session, the Dow Jones industrial average and S&P 500 index set a new closing record.

The Dow closed the day up 247 points, or 0.68%, the Nasdaq Composite closed up 1.2%, the S&P 500 index closed up 0.64% and the Russell 2000 index closed up 1.21%.

The convertible bond market saw $43 million in reported volume about one hour into the session and $311 million about one hour before the market close.

Heavily shorted names that were walloped at the end of 2021 were markedly improved in the first trading session of the new year, a source said.

Lucid Group Inc.’s 1.25% convertible notes due 2026 were again posting gains on an outright and dollar-neutral basis on a strong day for electric vehicle companies.

BridgeBio Pharma Inc.’s convertible notes were bouncing off their lows after stock tanked about 70% the previous week due to a failed clinical trial.

Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) remained one of the top traded names in the convertibles secondary space although with little price movement.

Lucid gains

Lucid Group’s 1.25% convertible notes due 2026 started 2022 on strong footing after closing 2021 below par.

The notes climbed about 4 points outright with stock up more than 7%.

They were changing hands at 103 in the late afternoon, the highest outright level for the notes since they priced in mid-December.

The notes expanded about 1 point dollar-neutral, a source said.

Lucid’s stock traded to a low of $37.96 and a high of $41.76 before closing the day at $40.93, an increase of 7.57%.

The electric vehicle manufacturer’s stock was boosted alongside other EV makers following Tesla Inc.’s delivery numbers, which blew away analyst expectations.

Lucid’s 1.25% convertible notes due 2026 have been volatile since the company priced the $2.01 billion issue at 99.5.

While the notes hit 102 shortly after pricing, they closed 2021 on a 98-handle.

BridgeBio bounces off lows

BridgeBio’s convertible notes were active and bouncing off of their lows after tanking the previous week.

The 2.25% convertible notes due 2029 were changing hands on a 58-handle in the late afternoon.

They improved about 2 to 2.5 points dollar-neutral from their lows the previous week, a source said.

The notes cratered 6 points dollar-neutral as stock crashed in the final week of the year.

The biopharmaceutical company’s 2.5% convertible notes due 2027 were changing hands at 75.

BridgeBio’s stock traded to a low of $15.67 and a high of $17.50 before closing the day at $17.16, an increase of 2.88%.

Stock was trading in the $40 range heading into the Dec. 28 week. The 2.25% convertible notes were trading at 78 and the 2.5% convertible notes were on a 117-handle.

However, the company’s stock and convertible notes crashed after the company announced failed clinical results for a heart-disease drug candidate that would have rivaled Pfizer.

The 2.25% convertible notes traded as low as 45 and the 2.5% convertible notes traded as low as 60 when the news hit on Dec. 27.

Southwest active

Southwest Airlines’ 1.25% convertibles due 2025 remained active on Monday although with little movement in price.

The notes were changing hands at 134.25 versus an equity price of $43.13 early in the session, according to a market source.

The convertibles were trading at 135.5 as stock continued to improve as the session progressed.

Southwest Airlines’ stock traded to a low of $42.51 and a high of $44.26 before closing the day at $44, an increase of 2.71%.

Mentioned in this article:

BridgeBio Pharma Inc. Nasdaq: BBIO

Lucid Group Inc. Nasdaq: LCID

Southwest Airlines Co. NYSE: LUV

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