Convertibles secondary begins new quarter slowly; Pinduoduo eyed; Block; Innoviva active

By Abigail W. Adams

Portland, Me., April 1 – The convertibles secondary space launched the first day of the second quarter slowly with trading activity muted on a choppy day for equity markets.

Equity indexes wavered between gains and losses throughout Friday’s session before a burst of late-day buying activity pushed them into the green.

The Dow Jones industrial average closed the day up 140 points, or 0.40%, the S&P 500 index closed up 0.34%, the Nasdaq Composite closed up 0.29% and the Russell 2000 index closed up 1.01%.

There was $45 million in reported volume about one hour into the session and $309 million on the tape less than one hour before the market close.

Pinduoduo Inc.’s 0% convertible notes due 2025 were in focus with the notes recouping their losses from the previous session.

Block Inc.’s 0.125% convertible notes due 2025 were active in secondary activity although largely unchanged.

Innoviva Inc.’s 2.125% convertible notes due 2028 shot further above par in active trading with the notes reaching their highest level since pricing in early March.

Pinduoduo in focus

Pinduoduo’s 0% convertible notes due 2025 were the most actively traded issue in the secondary space with the notes recouping their losses from the previous session.

The 0% convertible notes gained 1.5 points outright to return to an 89-handle.

The notes were changing hands just shy of 89.5 early Friday with a yield of 6.833%.

They rose to 89.75 in the late afternoon with the yield 6.64%.

There was $13 million in reported volume.

While the high premium convertible notes trade largely for their yield, Pinduoduo’s American Depositary Shares were again soaring on Friday.

The ADS traded to a high of $45.80 and a low of $41.69 before closing the day at $42.65, an increase of 6.33%.

The ADR space was strong again on Friday after news reports that Beijing was considering allowing the United States to have access to the audits of its U.S. listed companies.

China-based convertible notes were under pressure on Thursday as delisting concerns were again sparked by tough statements from Chinese regulators and the SEC flagging convertible issuer iQIYI Inc. for its use of an auditor that could not be inspected by U.S. regulators.

Block active

Block’s 0.125% convertible notes due 2025 were again active in the secondary space as the company’s stock continued to come in after a strong rally.

The 0.125% notes were changing hands at 131 versus a stock price of $133.70 in the late afternoon.

There was about $8 million in reported volume.

The notes were moving in line on a dollar-neutral basis.

Block’s stock traded to a high of $138.41 and a low of $131.73 before closing the day at $133.62, a decrease of 1.46%.

Innoviva gains

Innoviva’s 2.125% convertible notes due 2028 continued to break out of their rout on an outright basis with the notes shooting higher above par.

The 2.125% notes gained about 1 point outright with stock up 2%.

They traded as high as 101.25 during Friday’s session, the highest outright level for the notes since they priced at par on March 2.

However, they came in to trade at 100.5 versus a stock price of $19.71 in the late afternoon.

There was $6 million in reported volume.

Innoviva’s stock traded to a low of $19.32 and a high of $20.09 before closing the day at $19.74, an increase of 2.02%.

The notes have struggled on an outright basis since pricing and traded as low as 94 their initial days in the aftermarket.

However, the notes have slowly improved as the month progressed and have been wrapped around par since Monday.

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