Marathon Digital, Coinbase convertibles come in, Upstart lower amid equity sell-off

By Abigail W. Adams

Portland, Me., Jan. 21 – It was another turbulent day in the convertibles secondary space as selling pressure in high-flying tech stocks continued to drag down broader markets.

Disappointing earnings added to investor woes on Friday with Netflix Inc. crashing more than 20% on the heels of its fourth-quarter earnings report.

Equity benchmarks were volatile with some briefly entering into positive territory only to once again succumb to selling pressure into the close.

The Dow Jones industrial average closed the day down 450 points, or 1.3%, the S&P 500 index closed down 1.89%, the Nasdaq Composite closed down 2.72% and the Russell 2000 index closed down 1.78%.

“People are getting nervous,” a source said. However, volume remained light with panic not yet setting in.

But another week of heavy selling in equities may change that, a source said.

While the secondary space remained heavy, names with exposure to Bitcoin saw added pressure as the cryptocurrency sank below the $40,000 resistance level.

Bitcoin miner Marathon Digital Holdings, Inc.’s 1% convertible notes due 2026 was in focus as the notes sank further into distressed territory.

While volume in the name was light, Coinbase Global Inc.’s 0.5% convertible notes due 2026 were also down on an outright and dollar-neutral basis as stock cratered.

Upstart Holdings Inc.’s 0.25% convertible notes due 2026 also edged lower in active trading.

Bitcoin’s crash

Marathon Digital’s 1% convertible notes due 2026 were in focus as the notes sank further into distressed territory.

The 1% convertible notes traded down 3 points outright with stock off almost 5%.

The notes were changing hands at 68.5 versus a stock price of $23.20 early in the session. They continued to trade on a 68-handle heading into the close, a source said.

The yield on the notes is now over 9%.

The Bitcoin miners’ stock traded to a high of $24.31 and a low of $21.92 before closing the day at $22.06, a decrease of 11.18%.

While volume in the name was light, Coinbase’s 0.5% convertible notes due 2026 also fell as stock cratered.

The 0.5% notes fell almost 7 points early in the session but pared their losses as the session progressed.

The notes were changing hands at 93.375 early in the session but rose to 95.875 by the late afternoon, sources said.

The notes contracted about 0.25 point dollar-neutral on the move down, a source said.

The cryptocurrency exchange’s stock traded to a high of $210.19 and a low of $186.86 before closing the day at $191.97, a decrease of 13.38%.

Bitcoin crashed through its $40,000 support level on Friday and was trading at $38,232.10, a decrease of 5.98%, at the close of U.S. equity markets.

Bitcoin, which had been under pressure as investors flee risk assets, fell further after Russia proposed a ban on the cryptocurrency.

Upstart comes in

Upstart’s 0.25% convertible notes due 2026 were also coming in as stock continued its downward momentum on Friday.

The 0.25% notes were down about 3 points with stock off more than 12%.

The notes were changing hands at 84.875 versus a stock price of $101.05 early in the session.

They traded down to 83.25 by the late afternoon, a source said.

The theoretical delta for the notes is 50%. However, most holders are using a lighter hedge, a source said.

Upstart’s stock traded to a high of $106.28 and a low of $91.83 before closing the day at $92.72, a decrease of 12.75%.

The 0.25% convertible notes were, at one point, among the best performing new deals of 2021 and traded as high as 158 as stock peaked at $401.49.

However, the high-multiple growth stock has gotten pummeled amid the market sell-off.

Mentioned in this article:

Coinbase Global Inc. Nasdaq: COIN

Marathon Digital Holdings, Inc. Nasdaq: MARA

Upstart Holdings Inc. Nasdaq: UPST

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