Northern Oil & Gas convertible notes hit new heights; Asian names draw investor interest

By Abigail W. Adams

Portland, Me., Oct. 19 – The convertibles primary market remained dormant and the secondary quiet as the rally in equity markets came to an end.

Equity indexes struggled to find direction early in the session as the market digested a slew of stronger-than-expected earnings coupled with a 10-year Treasury yield that hit a new 52-week high on Wednesday.

While mixed at the open, selling pressure took hold midway through the session, and while indexes closed well off the lows of the day, they remained firmly in the red.

The Dow Jones industrial average closed Wednesday down 100 points, or 0.33%, the S&P 500 index closed down 0.67%, the Nasdaq Composite index closed down 0.85% and the Russell 2000 index closed down 1.72%.

There was $51 million in reported volume about one hour into the session and $330 million on the tape less than one hour before the close.

MongoDB Inc.’s 0.25% convertible notes due 2026 continued to see heavy volume with the notes lower alongside stock.

Northern Oil and Gas Inc.’s 3.625% convertible notes due 2029 hit new outright heights as stock soared despite the red tape following an acquisition in the Midland basin.

The convertible notes of China-based companies sparked interest as equities in the ADR space were “rocked” amid China’s 20th Party Congress.

Nio Inc.’s convertible notes traded to their lowest outright level in recent history as its equity tumbled double digits.

However, Pinduoduo Inc.’s 0% convertible notes due 2025, which saw heavy volume, were relatively unchanged with the notes offering a hefty yield as their put date approaches.

MongoDB active

MongoDB’s 0.25% convertible notes due 2026 remained one of the most actively traded issues in the secondary space with the notes lower outright alongside stock.

The 0.25% notes were down 1.5 points outright with stock off more than 2%.

They were changing hands at 112.875 versus a stock price of $186.59 in the late afternoon.

There was $11 million in reported volume.

MongoDB’s stock traded to a high of $189.62 and a low of $180.81 before closing the day at $184.77, a decrease of 2.74%.

MongoDB’s notes have been a mainstay on the volume charts in recent sessions with the notes seeing heavy volume since their addition to the Refinitiv convertible indexes last week.

Northern Oil’s new heights

Northern Oil’s 3.625% convertible notes due 2029 hit new outright heights on Wednesday as stock soared despite the red tape following a new acquisition.

The 3.625% convertible notes rose 4.5 points outright with stock up over 5%.

They were changing hands at 114.375 versus a stock price of $35.37 in the late afternoon.

The notes expanded on the move up, a source said.

There was $10 million in reported volume.

Northern Oil’s stock traded to a low of $33.34 and a high of $35.47 before closing the day at $35.21, an increase of 5.29%.

Stock spiked after Northern Oil acquired a 36.7% working interest in a development project in the Midland Basin.

Wednesday also marked a strong day for energy names with crude oil futures up 3%.

The ADR space

The ADR space sparked some interest on Wednesday with the equities of several convertible note issuers “rocked” amid China’s Party Congress.

While some names were lower amid the move in equities, short-duration notes with high yields were attracting buying interest.

Pinduoduo’s 0% convertible notes due 2025 were relatively unchanged in heavy volume.

The 0% notes remained on a 90-handle.

They were changing hands in the 90.5 to 90.75 context throughout the session with a yield of 9% to 9.5%, a source said.

The long-busted convertible notes trade for their yield with the notes putable on Dec. 1, 2023, a source said.

While quiet on Wednesday, Hello Group Inc.’s (formerly Momo Inc.) 1.25% convertible notes due 2025 saw heavy volume on Tuesday.

Momo’s 1.25% convertible notes were also relatively unchanged with the notes on a 93-handle.

The notes become putable on July 1, 2023 and were offering a yield of almost 12%.

The notes were attractive based on their yields, assuming the companies will honor the puts, a source said.

With the recent euphoria in the market, investors may be willing to take on the risk with the convertible notes of China-based companies getting “a nibble,” a source said.

However, Nio’s convertible notes traded down to their lowest point in recent history as its equity declined double digits.

Nio’s 0% convertible notes due 2026 were off about 2 points outright with the notes marked down to 84.

The 0.5% convertible notes due 2027 were also down about 2 points outright to 75.

Nio’s American Depositary Shares traded to a high of $11.90 and a low of $10.71 before closing the day at $10.92, a decrease of 10.71%.

While Nio’s notes were lower, volume in the name was light.

The 0% convertible notes due 2026 become putable on Feb. 1, 2024 with the high yield giving hope for improvement.

They “might start to look attractive,” a source said.

Mentioned in this article:

Hello Group Inc. Nasdaq: MOMO

MongoDB Inc. Nasdaq: MDB

Nio Inc. NYSE: NIO

Northern Oil and Gas Inc. NYSE: NOG

Pinduoduo Inc. Nasdaq: PDD

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