Convertibles quiet amid stock volatility; Snap in focus; Vroom, Beyond Meat active

By Abigail W. Adams

Portland, Me., April 12 – It was another quiet day in the convertibles secondary space on Tuesday with equity markets volatile on the heels of the latest U.S. Consumer Price Index report.

The report reflected the largest increase in consumer prices since 1981 with the index rising to 8.5% in March and a 1.2% month-over-month increase.

While the report came in greater than expectations for an increase to 8.4%, the core price index report, excluding food and energy, came in with just a 0.3% month-over-month increase, the smallest increase in the last five months.

Equity indexes rallied strongly early in the session. However, selling pressure resumed in the early afternoon with most indexes closing in the red.

The Dow Jones industrial average closed down 0.26%, the S&P 500 index closed down 0.34%, and the Nasdaq Composite index closed down 0.30%.

The Russell 2000 index remained in positive territory and closed up 0.39%.

While equity markets were volatile on Tuesday, the convertibles secondary space remained quiet.

There was $59 million in reported convertibles trading volume a little more than one hour into the session and $386 million on the tape less than one hour before the market close.

Snap Inc.’s convertible notes were in focus as the social media company’s stock went from gains of more than 4% to losses of more than 2%.

Several distressed names were also active on the tape as investors search for yield amid rising rates.

Beyond Meat Inc.’s 0% convertible notes 2027 fell further into distressed territory with the notes hitting a new all-time low.

Vroom Inc.’s 0.75% convertible notes due 2026 were also weaker in active trading with the yield on the notes above 21%.

Snap notes eyed

Snap’s convertible notes were in focus on a volatile day for the company’s stock, which launched the session with gains of almost 4.5% but closed the day down more than 2%.

Snap’s 0% convertible notes due 2027 were the most actively traded name in the secondary space.

The notes were down about 0.5 point outright in the late afternoon.

They were changing hands at 83.375 versus a stock price of $33.53 in the late afternoon.

There was $11.5 million in reported volume.

Snap’s 0.125% convertible notes due 2028 were down 1.5 points outright.

The notes were wrapped around 97 in the late afternoon.

There was $8 million in reported volume.

Snap’s stock traded to a high of $35.94 and a low of $33.21 before closing the day at $33.60, a decrease of 2.31%.

Snap’s $1.5 billion issue of the 0.125% convertible notes was the largest deal to price year to date.

The convertible notes have been volatile alongside the broader market.

The notes traded as high as 104 shortly after pricing in mid-February. However, they dropped as low as 90 in the equity sell-off of mid-March.

The convertible notes again topped par last week as equities rallied. However, they have been on a downtrend alongside stock since last Friday.

Distressed issues

Several distressed convertible notes were active on the tape on Tuesday.

“With rates moving up, people are definitely looking for higher yields,” a source said.

Beyond Meat’s 0% convertible notes due 2027 hit a new all-time low in active trading on Tuesday.

The 0% notes dropped about 0.5 point outright.

They were changing hands between 54.5 and 54.875 during Tuesday’s session.

The yield on the notes was 12.5%.

There was $7.5 million in reported volume.

Beyond Meat’s stock traded to a high of $46.50 and a low of $43 before closing the day at $43.70, a decrease of 0.59%.

However, the plant-based food company’s convertible notes have long been busted and were trading for the yield.

Vroom’s 0.75% convertible notes due 2026 fell about 1 point outright.

They were changing hands at 44.75 heading into the market close.

The yield on the notes was about 21.25%.

There was $7 million in reported volume.

Vroom’s stock traded to a high of $2.31 and a new 52-week low of $2.05 before closing the day at $2.08, a decrease of 3.70%.

Vroom’s stock was $40.01 when the e-commerce platform for used vehicles priced the $625 million issue of the 0.75% notes at par in June 2021.

However, the company was particularly hard hit as growth stocks came under pressure amid rising rates.

Vroom’s cash burn is among the highest of convertible notes issuers, a source said.

Mentioned in this article:

Beyond Meat Inc. Nasdaq: BYND

Snap Inc. NYSE: SNAP

Vroom Inc. Nasdaq: VRM

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