Upstart convertibles in focus; Coinbase volatile outright, up on swap; Twitter down

By Abigail W. Adams

Portland, Me., May 16 – It was a relatively quiet start to the week in the convertibles secondary space on a choppy day for equities.

Equity indexes wavered between gains and losses throughout Monday’s session before closing the day mixed.

The Dow Jones industrial average stayed in the green and closed Monday up 27 points, or 0.08%.

The S&P 500 index closed down 0.39%, the Nasdaq Composite index closed down 1.20% and the Russell 2000 index closed down 0.52%.

After a strong rally on Friday, growth stocks were giving back some of their gains.

However, Upstart Holdings Inc.’s 0.25% convertible notes due 2026 continued to improve outright after hitting an all-time low the previous week.

Coinbase Global Inc.’s 0.5% convertible notes due 2026 were volatile with the notes down outright early in the session but flat at the close.

While volatile outright, the 0.5% notes were improved dollar-neutral and remained well above the lows they hit after the company’s post-earnings crash the previous week.

Chegg Inc.’s 0% convertible notes due 2026 were the major winners of Monday’s session with the notes lifted by takeover speculation.

However, Twitter Inc.’s convertible notes continued to lose ground as doubts continue to grow about Elon Musk’s takeover of the company.

Upstart notes eyed

Upstart Holdings’ 0.25% convertible notes due 2026 were in focus as the notes continued to improve on an outright basis after hitting an all-time low the previous week.

The 0.25% notes gained 0.625 point outright.

They were changing hands at 59.75 versus a stock price of $38.20 in the late afternoon, according to a market source.

The notes were carrying a yield of 12.875%.

There was $17 million in reported volume.

Upstart’s stock wavered between gains and losses before closing the day flat.

Stock traded to a high of $40.33 and a low of $37 before closing the day flat at $38.13.

Upstart’s stock rebounded strongly after hitting a 52-week low of $25.43 following its earnings announcement.

The convertible notes traded down to a 56-handle last Wednesday but have been climbing back since.

Coinbase volatile

Coinbase’s 0.5% convertible notes were volatile outright but improved dollar-neutral in active trading on Monday.

The 0.5% notes were down about 2 points outright to 66.75 early in the session.

They regained some footing to trade at 67.25 in the late afternoon as the stock pared its losses.

The notes continued to improve on a dollar-neutral basis with the notes now up 4 to 5 points on hedge from their post-earnings low the previous week.

“There’s a lot of buyers in the market for them,” a source said.

The notes remained active with $11 million in reported volume.

Coinbase’s stock traded to a high of $68.08 and a low of $60.51 before closing the day at $61.70, a decrease of 9.09%.

Stock was volatile on Monday after nearly wiping out its post-earnings losses in a spectacular rebound on Friday.

Stock closed Friday up 16% as Bitcoin rebounded from a flash crash and investors reexamined the crypto-currency exchange’s fundamentals.

However, stock was again under pressure with Bitcoin unable to hold $30,000 as a support.

Bitcoin was changing hands at $29,628.30, a decrease of 5.28%, shortly after the close of U.S. equity markets.

While flat to down on an outright basis on Monday, the 0.5% convertible notes remained well off their post-earnings lows with the notes trading down to 53 last Wednesday.

Twitter lower

Twitter’s convertible notes continued to lose ground as questions mount about Musk’s takeover of the company.

Twitter’s 0% convertible notes due 2026, which had the most to gain from a takeout, fell another 1.5 points outright.

The 0% notes were changing hands at 88 versus a stock price of $37.72 in the late afternoon.

There was $8 million in reported volume.

While less active, Twitter’s 0.25% convertible notes due 2024 sank below par and were changing hands on a 98-handle on Monday.

Twitter’s stock traded to a high of $39.29 and a low of $37.32 before closing the day at $37.39, a decrease of 8.18%.

Twitter’s convertible notes have largely returned to their late March levels as stock gave back all gains since Musk’s takeover saga began with his 9% ownership stake disclosure on April 4.

Musk announced on Friday the deal was on hold and there is speculation he may attempt to renegotiate his price for the social media site.

Questions had mounted about Musk’s $21 billion equity commitment to finance the $44 billion takeover.

Chegg improves

Chegg’s convertible notes were the major winners of Monday’s session on speculation the education technology company was being eyed as a takeover target.

The 0% convertible notes due 2026 rose 4 points outright.

They were trading at 76 versus a stock price of $19.41 in the late afternoon, according to a market source.

The notes were improved dollar-neutral.

There was $14 million in reported volume.

Chegg’s stock traded to a high of $20.41 and a low of $17.30 before closing the day at $18.75, an increase of 3.02%.

The convertible notes spiked alongside stock after news broke mid-session that Indian education technology company Byju may make a takeover bid for Chegg.

The 0% convertible notes stand to be major winners in a change-of-control, a source said.

Mentioned in this article:

Chegg Inc. NYSE: CHGG

Coinbase Global Inc. Nasdaq: COIN

Twitter Inc. NYSE: TWTR

Upstart Holdings Inc. Nasdaq: UPST

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