iQIYI gains continue; ZTO active; Snap convertible notes up outright, mixed on hedge

By Abigail W. Adams

Portland, Me., Aug. 31 – There was an uptick of activity in the convertibles secondary space on the final trading day of August.

End-of-month repositioning and topical news remained the driving force of trading activity on a choppy day for equity markets.

Equity indexes were again unable to snap their losing streak and closed Wednesday in the red after wavering between gains and losses throughout the session.

The Dow Jones industrial average closed down 280 points, or 0.88%, the S&P 500 index closed down 0.78%, the Nasdaq Composite index closed down 0.56% and the Russell 2000 index closed down 0.62%.

There was $52 million in reported volume about one hour into the session and $423 million on the tape about one hour before the market close.

ZTO Express’ 1.5% convertible notes due 2027 continued to see heavy volume although with little movement in price.

iQIYI, Inc.’s convertible notes continued to add to their gains in active trading.

Snap Inc.’s convertible notes were also on the rise on an outright basis.

However, the notes were mixed on hedge as stock skyrocketed on the company’s cost-cutting measures.

ZTO active

ZTO’s 1.5% convertible notes due 2027 continued to see heavy volume although with little movement in price on Wednesday.

The 1.5% notes were changing hands at 101.875 versus an equity price of $25.85 in the late afternoon.

There was $11 million in reported volume.

ZTO’s American Depositary Shares traded to a low of $25.58 and a high of $26.65 before closing the day at $26.05, an increase of 2.12%.

While ZTO’s convertible notes have held onto outright gains since the $870 million issue priced on Aug. 24, the notes have underperformed on swap, sources said.

iQIYI gains continue

iQIYI’s convertible notes continued to add to gains after news of a private placement sent them skyrocketing on Tuesday.

iQIYI’s 2% convertible notes due 2025 were the most actively traded issue during Wednesday’s session.

The notes gained another 1.25 points outright.

They were seen at 90.75 in the late afternoon with the yield falling to 19.72%.

There was $15 million in reported volume.

iQIYI’s 4% convertible notes due 2026 rose another 0.25 point outright.

They were changing hands at 70.50 with the yield 24.13% in the late afternoon.

iQIYI’s convertible notes are largely a yield play.

However, the Beijing-based streaming service’s equity saw a minor rebound after falling more than 9% post-earnings.

iQIYI’s American Depositary Shares traded to a low of $3.60 and a high of $3.82 before closing the day at $3.66, an increase of 3.10%.

The company’s 2% and 4% convertible notes jumped 6 points on Tuesday following news of a $500 million private placement of convertible notes.

The private placement increased investor confidence in the company’s ability to pay off the convertible notes.

The 2% convertible notes become putable on April 1, 2023 and the 4% convertible notes become putable on Aug. 1, 2024.

Snap mixed

Snap’s convertible notes were making gains on an outright basis but were mixed on hedge as stock jumped after the social media and camera company announced cost-saving measures.

Snap’s 0% convertible notes due 2027 were the most active in the capital structure.

The 0% notes gained 0.5 point outright.

They were changing hands at 72.75 in the late afternoon with the yield just shy of 7%.

There was $10 million in reported volume.

The 0% notes are not equity sensitive, and if they move on hedge the delta market players use is hard to determine, a source said.

The 0% notes carry the highest conversion premium of Snap’s tranches with a premium greater than 700%.

Snap’s 0.75% convertible notes due 2026 gained outright and dollar-neutral on the stock move.

The 0.75% notes increased about 3 points outright.

The notes were trading at 93.125 versus a stock price of $11.41 early in the session.

Activity in the issue waned as the session progressed; however, they gained about 0.25 to 0.5 point on swap.

They move on a theoretical delta of 54%, a source said.

There was $7 million in reported volume.

Snap’s 0.125% convertible notes due 2028 gained 1 point outright early but gave back those gains as the session progressed.

The notes were changing hands at 71 versus a stock price of $11.44 early in the session.

They were trading at 70.35 versus a stock price of $10.85 in the late afternoon.

The notes contracted about 1 point on the stock move, a source said.

They move on a theoretical delta of 75%.

Snap’s stock traded to a low of $10.20 and a high of $11.60 before closing the day at $10.88, an increase of 8.69%.

Stock soared after the social media company announced several cost-cutting measures, including laying off 20% of its workforce and scrapping several projects.

Mentioned in this article:

iQIYI, Inc. Nasdaq: IQ

Snap Inc. NYSE: SNAP

ZTO Express NYSE: ZTO

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.