Twitter in focus, expands on stock surge; China-based convertible notes improve

By Abigail W. Adams

Portland, Me., April 4 – It was a relatively quiet day in the convertible secondary space as equity markets extended their gains on the second trading session of the second quarter.

The Dow Jones industrial average closed Monday up 104 points or 0.3%, the S&P 500 index closed up 0.81%, and the Nasdaq Composite closed up 1.9%.

The Russell 2000 index wavered between gains and losses throughout the session before closing up 0.21%.

While equity markets launched the second quarter in positive territory, a level of apprehension remains in the market as investors brace for first-quarter earnings, a source said.

However, activity in the secondary space was muted with $68 million about one hour into the session and $278 million on the tape about one hour before the market close.

Twitter Inc. was the name of the day on Monday with the social media company’s convertible notes making large gains on an outright and dollar-neutral basis as stock surged following news Elon Musk had taken a sizeable position in the social media company.

The convertible notes of several China-based companies continued to improve in active trading as Beijing signals willingness to open its firms to U.S.-approved auditors.

Pinduoduo Inc.’s 0% convertible notes due 2025, iQIYI Inc.’s convertible notes and JOYY Inc.’s 0.75% convertible notes due 2025 were on the rise during Monday’s session.

Twitter in focus

Twitter was the name of the day on Monday with the social media company’s convertible notes making large gains on an outright and dollar-neutral basis as stock surged following news Elon Musk had taken a sizeable stake in the company.

Twitter’s 0% convertible notes gained 3 points outright with stock up more than 25%.

The convertible notes were changing hands at 87.75 versus a stock price of $47.75 early in the session, according to a market source.

They traded up to an 88-handle in the afternoon.

There was more than $30 million in reported volume.

Twitter’s 0.25% convertible notes due 2024 rose more than 9 points outright.

They were changing hands at 109.5 versus a stock price of $47.46 early in the session.

They continued to climb to trade at 112.5 in the late afternoon.

There was $14 million in reported volume.

Twitter’s stock traded to a high of $51.37 and a low of $46.86 before closing the day at $49.93.

News broke Monday that Tesla chief executive officer Elon Musk had a passive 9.2% stake in Twitter as of March 14.

Musk revealed his stake after criticizing the social media platform’s content rules.

The move has led to speculation that a buyout of Twitter may be on the horizon, a source said.

China-based convertibles gain

Monday marked another strong session for China-based convertible notes as Beijing signaled further support for its U.S.-listed companies.

“The Asian paper is rocking again,” a source said.

Pinduoduo’s 0% convertible notes due 2025 rose another 1 point outright as the company’s equity shot up 15%.

The notes, which trade largely for their yield, were changing hands at 90.5 in the late afternoon.

The Shanghai-based e-commerce platform’s American Depositary Shares traded to a low of $44.81 and a high of $49.87 before closing the day at $49.30, an increase of 15.59%.

iQIYI’s 2% convertible notes due 2025 gained 1.5 points outright.

The notes were changing hands at 80.25 in the late afternoon with a yield of 9.787%.

The Beijing-based media streaming service provider’s 4% convertible notes due 2026 rose about 1 point outright to 70.625 in the midafternoon.

iQIYI’s ADSs traded to a low of $5.05 and a high of $5.64 before closing the day at $5.58, an increase of 16.74%.

JOYY’s 0.75% convertible notes due 2025 rose 2 points to trade up to 93.5 in the late afternoon.

The Guangzhou, China-based social media company’s ADSs traded to a low of $39.25 and a high of $42.27 before closing the day at $41.34, an increase of 8.99%.

The convertible notes of China-based companies have been on an upswing since late last week when delisting fears drove down the already struggling convertible notes.

However, China has signaled further support for its companies with U.S.-listed shares by drafting a new rule regarding the examination of financial documents which no longer limit firms to China’s regulators but enable cross-border regulatory cooperation.

iQIYI announced last Thursday that it had been flagged by the SEC under the Holding Foreign Companies Accountable Act due its use of an auditor that could not be inspected by U.S. regulators.

Companies in violation of the HFCAA for three consecutive years face delisting.

Mentioned in this article:

iQIYI Inc. Nasdaq: IQ

JOYY Inc. Nasdaq: YY

Pinduoduo Inc. Nasdaq: PDD

Twitter Inc. NYSE: TWTR

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