Pinduoduo down; RingCentral active; Affirm hits new low; DocuSign quiet as stock tanks

By Abigail W. Adams

Portland, Me., March 11 – It was a quiet end to a turbulent week in the convertibles secondary space as equities ended another volatile session in the red.

While indexes were mixed early in the session, selling pressure accelerated into the close.

The Dow Jones industrial average closed down 230 points, or 0.69%, and the S&P 500 index closed down 1.3%, the Nasdaq Composite closed down 2.18% and the Russell 2000 index closed down 1.59%.

There was about $50 million on the tape one hour into the session and $378 million in reported volume about one hour before the market close.

Pinduoduo Inc.’s 0% convertible notes due 2025 remained under pressure in active trading as its equity continued to get pounded on delisting concerns.

RingCentral Inc.’s 0% convertible notes due 2025 were lower in active trading with stock down alongside broader markets.

Affirm Holdings Inc.’s 0% convertible notes due 2026 also hit a new low during Friday’s session.

While DocuSign Inc.’s stock plummeted double digits following earnings, the company’s 0% convertible notes due 2024 were relatively quiet with the notes continuing to hold their bond floor.

Pinduoduo down again

Pinduoduo’s 0% convertible notes due 2025 continued to move lower in high-volume activity during Friday’s session.

The 0% convertible notes sank 1 point outright.

They were changing hands at 85.5 versus an equity price of $33.99 early in Friday’s session, according to a market source.

They traded down to 85 by late afternoon.

The yield on the notes was now 9.722%.

There was $12.5 million in reported volume.

Pinduoduo’s American Depositary Shares traded to a high of $37.07 and a low of $32.09 before closing the day at $32.13, a decrease of 10.15%.

Pinduoduo’s ADSs were again under pressure alongside the equity of other China-based companies.

“The Asian stuff is getting pounded,” a source said. “Everyone is selling because of the delisting threat.”

Pinduoduo’s 0% convertible notes were contracted about 0.75 point dollar-neutral on Thursday as the Shanghai-based e-commerce platform’s equity fell almost 18%.

The ADRs of China-based companies have plummeted over the past two sessions after the Securities and Exchange Commission named five Chinese companies that may be delisted under the Holding Foreign Companies Accountable Act.

RingCentral lower

RingCentral’s 0% convertible notes due 2025 were lower in active trading with stock under pressure alongside the broader market.

The 0% notes were traded down about 0.625 point outright to end the day on an 85-handle.

The notes were changing hands at 85.5 versus an equity price of $104.71 in the late afternoon.

The yield on the notes was now 5.397%.

There was $13 million in reported volume.

RingCentral’s stock traded to a high of $112.34 and a low of $103.27 before closing the day at $103.47, a decrease of 6.57%.

The 0% convertible notes have long been busted with a conversion premium over 130%. They have largely traded near their bond floor.

Credit-sensitive convertible notes that trade for their yield have been under added pressure over the past week with the blowout in credit spreads, sources said.

Affirm’s new low

Affirm’s 0% convertible notes due 2026 hit a new low alongside stock on Friday.

The 0% convertible notes traded down to 67 in the late afternoon with the notes now yielding 8.73%.

The level marked a new low for the struggling notes, a source said.

Affirm’s stock also hit a new 52-week low.

Stock traded to a high of $37.06 and a new 52-week low of $30.78 before closing the day at $30.86, a decrease of 15.57%.

While the notes have long been busted and are bordering on distressed levels, Affirm is still an $8 billion market cap company, which suggests it is not distressed, a source said.

The discrepancy between the trading level of the bonds and its stock has been noted before as an indication that either the bonds are undervalued or the company’s equity is overvalued.

The activity in the notes on Friday was largely the result of hedge players unwinding their position as outright accounts increased their positions.

DocuSign holds

DocuSign’s 0% convertible notes due 2024 were holding up well as its equity plunged 20% following another disappointing earnings report.

While equity was down double digits, the 0% notes only traded down about 0.5 point outright, a source said.

The 0% notes were changing hands at 93.5 late Friday.

However, volume in the name was light.

The short-duration notes have long been busted and largely trade for their yield, a source said.

DocuSign’s stock traded to a high of $77.81 and a low of $71 before closing the day at $75.01, a decrease of 20.10%.

Stock tanked following earnings.

While earnings per share of 48 cents were in line with expectations and revenue of $580.83 million beat analyst expectations of $561.55 million, forward guidance came in lower than expected.

Thursday’s earnings report marks the second consecutive report that sent stock down double digits. Stock plummeted more than 40% following third-quarter earnings in December.

Mentioned in this article:

Affirm Holdings Inc. Nasdaq: AFRM

DocuSign Inc. Nasdaq: DOCU

Pinduoduo Inc. Nasdaq: PDD

RingCentral Inc. NYSE: RNG

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