Convertibles secondary weak amid ‘tech wreck’; Ford, Expedia drop in active trading; Spotify down again

By Abigail W. Adams

Portland, Me., July 15 – It was another brutal day in the convertible secondary space as inflation concerns once again pressured growth stocks.

While volume was light early in the session with many on the sidelines, selling pressure hit the secondary space as the session progressed and losses in small-cap stocks and the tech sector mounted.

“It’s a tech wreck,” a source said.

While the Dow Jones industrial average squeaked out a gain by the session end, closing the day up 54 points or 0.15%, the S&P 500 index closed the day down 0.33%, the Nasdaq Composite closed the day down 0.70%, and the Russell 2000 closed the day down 0.55%.

There was $65 million in reported volume about one hour into the session with few names seeing concentrated trading activity.

However, trading volume jumped to $500 million heading into the close with outright sellers in the market.

Convertible notes were trading into the bid with the overall market coming in on a dollar-neutral basis, a source said.

Several No-Nos, or 0% convertible bonds that priced at par, which came in the first half of the year and have performed reasonably well, were on the tape on Thursday as sellers attempted to lock in profits.

Expedia Group Inc.’s 0% convertible notes due 2026, Ford Motor Co.’s 0% convertible notes due 2026, ON Semiconductor Corp.’s 0% convertible notes due 2027 and Snap Inc.’s 0% convertible notes due 2027 all made an appearance on the tape with the notes coming in on an outright and dollar-neutral basis.

Spotify Technology SA’s 0% exchangeable notes due 2026 were also active and sank further below par during Thursday’s session.

Under pressure

Several 0% convertible bonds that trade above par were on the tape on Thursday with outright sellers in the market attempting to lock in profits on another brutal day for the tech sector.

Expedia’s 0% convertible notes due 2026 were among the most actively traded names in the secondary space.

Trading in the name was “sloppy,” with holders selling into the bid, a source said.

The 0% convertible notes were down 1 point outright with stock off about 1%.

They were changing hands at 107.875 versus a stock price of $158.79 in the late afternoon.

There was about $16 million in reported volume.

Expedia stock traded to a high of $160.63 and a low of $157.80 before closing the day at $159.29, a decrease of 1.06%.

Ford’s 0% convertible notes due 2026 were also down about 0.625 point outright with stock off more than 1%.

The notes were changing hands at 108.125 versus a stock price of $14.15 in the late afternoon.

There was more than $13 million in reported volume.

Ford stock traded to a high of $14.30 and a low of $13.94 before closing the day at $14.01, a decrease of 1.72%.

ON Semiconductor’s 0% convertible notes due 2027 dropped 1.625 points outright with stock off more than 3.5%.

The notes were changing hands at 102.75 versus a stock price of $36.18 in the late afternoon.

There was about $8 million in reported volume.

ON Semiconductor stock traded to a high of $37.47 and a low of $35.66 before closing the day at $36.30, a decrease of 3.61%.

Snap’s 0% convertible notes due 2027 were down 1 point with stock off more than 3%.

The notes were changing hands at 102.5 versus a stock price of $60.33 in the late afternoon.

There was about $5 million in reported volume.

Snap stock traded to a high of $62.63 and a low of $59.75 before closing the day at $60.50, a decrease of 3.15%.

Spotify down again

Spotify’s 0% exchangeable notes due 2026 sank further below par in active trading on Thursday.

The 0% notes dropped about 0.625 point outright with stock off more than 2%.

The notes were changing hands at 91.25 versus a stock price of $247.75 in the late afternoon.

There was more than $12 million in reported volume.

Spotify stock traded to a high of $256.18 and a low of $246.83 before closing the day at $247.97, a decrease of 2.15%.

Spotify’s 0% convertible notes have largely languished below par since the media company priced the $1.5 billion issue in late February.

The company’s stock has been particularly hard hit by the pullback in the tech sector.

However, after bottoming out around 88 in mid-May, the notes had staged a modest rebound on an outright basis and traded as high as 93 earlier in the week.

The exchangeable notes priced against a stock price of $303.06.

The pricing of the deal was among the more aggressive of the No-Nos to come early in the year.

The notes priced with an initial exchange premium of 70%, or an exchange price of $515.20.

Mentioned in this article:

Expedia Group Inc. Nasdaq: EXPE

Ford Motor Co. NYSE: F

ON Semiconductor Corp. Nasdaq: ON

Snap Inc. NYSE: SNAP

Spotify Technology SA NYSE: SPOT

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