Convertibles secondary space active; Palo Alto expands; Pioneer Natural gains outright

By Abigail W. Adams

Portland, Me., Nov. 23 – The convertibles secondary space was active on Monday with more than $2 billion in estimated volume at the market close as equities rallied amid more positive news about a Covid-19 vaccine, sources said.

While volume was elevated on Monday, trading activity is expected to taper off as the week progresses with many taking vacation days surrounding Thursday’s Thanksgiving holiday.

Recent issues continued to see heavy volume with Pinduoduo Inc.’s 0% convertible notes due 2025 again topping the volume charts.

However, while the notes continued to gain on an outright basis, they were largely moving in line on a dollar-neutral, or hedged, basis.

Liberty Broadband Corp.’s latest exchangeable notes tied to Charter Communications Inc.’s class A common stock remained active with the notes slightly weaker dollar-neutral.

Palo Alto Networks Inc.’s 0.375% convertible notes due 2025 were also major volume movers during Monday’s session, with the notes expanding in the high-volume activity.

The reopening trade was again in focus with names in the travel, leisure and energy sectors again the major benefactors of the positive Covid-19 vaccine news.

Pioneer Natural Resources Co.’s 0.25% convertible notes due 2025 were on the rise as the oil and natural gas company’s stock continued its upward momentum.

Pinduoduo active

Pinduoduo’s 0% convertible notes due 2025 remained active with the notes continuing to gain on an outright basis.

The 0% notes traded up to 108.25 with the company’s American Depositary Shares posting gains soon after the opening bell.

However, the 0% notes dropped back to a 107-handle as the Shanghai-based e-commerce platform’s equity came in.

The notes were changing hands at 107.5 in the late afternoon, according to a market source.

The notes were largely moving in line with the underlying equity and were unchanged dollar-neutral.

Pinduoduo’s ADSs traded to a high of $148.94 and a low of $140.58 before closing the day at $141.05, a decrease of 1.74%.

Liberty weakens

Liberty Broadband’s 1.25% exchangeable notes due 2050 tied to Charter’s stock remained active in the secondary space.

The notes were continuing to trade in the 101.5 to 102 context in active trading, a source said.

However, the notes were slightly weaker dollar-neutral, a source said.

Charter’s stock traded to a high of $659.56 and a low of $642.70 before closing the day at $645.04, a decrease of 1.58%.

Palo Alto active

Palo Alto’s 0.375% convertible notes due 2025 were major volume movers on Monday.

The notes were down about 1 point outright to 116.5 with stock off about 1% early in the session.

They returned to a 117-handle as stock turned positive heading into the afternoon and were changing hands at 117.5 heading into the market close.

The notes expanded about 0.375 point dollar-neutral during Monday’s session, a source said.

Palo Alto’s stock traded to a high of $296.71 and a low of $288.45 before closing the day at $296.04, an increase of 1.35%.

The 0.375% notes were one of the most actively traded issues in the secondary space on Monday with $78 million in estimated volume.

Buying activity outnumbered selling activity 5:1, according to a market source.

While the notes were active, sources queried were unsure about what sparked the trading activity.

In addition to recent earnings and a new acquisition, the cyber-security firm recently rolled out the industry’s first 5G security offering with Palo Alto positioning itself as a leading provider of security for 5G networks.

Pioneer gains

Pioneer Natural Resources’ 0.25% convertible notes due 2025 were making large gains on an outright basis as stock popped during Monday’s session.

The 0.25% notes gained more than 4 points outright with stock up more than 9%.

The 0.25% notes traded up to 122.25 by the market close, a source said.

Pioneer Natural Resources’ stock traded to a low of $97.30 and a high of $104.53 before closing the day at $104.50, an increase of 9.07%.

The natural gas company’s stock has been on a tear over the past week.

Pioneer Natural Resources is an investment-grade credit in the energy sector.

The energy sector, as a whole, was on the rise on Monday with oil and gas names major benefactors from the increased demand that would come with a full reopening of the economy.

Mentioned in this article:

Charter Communications Inc. Nasdaq: CHTR

Palo Alto Networks Inc. NYSE: PANW

Pinduoduo Inc. Nasdaq: PDD

Pioneer Natural Resources Co. NYSE: PXD

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