Accolade convertibles sink as stock plunges post earnings; Bilibili better; Liberty eyed

By Abigail W. Adams

Portland, Me., April 29 – The new day brought a new disaster du jour in the convertibles market as equity markets gave back their gains from Thursday’s session following the latest spate of tech earnings.

The Dow Jones industrial average closed Friday down 939 points, or 2.77%, the S&P 500 index closed down 3.63%, the Nasdaq Composite index closed down 4.17% and the Russell 2000 closed down 2.87%.

In a week chock full of dramatic reversals, “that was another major reversal,” a source said.

“There’s no real reason for it other than it went up yesterday,” another source said.

Accolade Inc.’s 0.5% convertible notes due 2026 were Friday’s ‘disaster du jour’ with the notes getting pummeled on an outright and dollar-neutral basis as stock was cut in half following earnings.

While volume in the name was light, Bilibili Inc.’s 1.25% convertible notes due 2027 were a bright spot on a brutal day with the ADR space lifted after Beijing announced it was nearing the end of its regulatory crackdown.

Western Digital Corp.’s 1.5% convertible notes due 2024 were active.

With a large swath of outstanding convertible notes busted, opportunistic buyers were beginning to turn to their market in search of short-duration yield plays, sources said.

Liberty Broadband Corp.’s 2.75% senior debentures due 2050 exchangeable for Charter Communications, Inc. were active as Charter’s stock fell following earnings.

The notes gained dollar-neutral on the move and were looking attractive on a yield-to-put basis, a source said.

Accolade ‘ouch’

Accolade’s 0.5% convertible notes due 2026 claimed the title of ‘disaster du jour’ on Friday with the notes tanking on an outright and dollar-neutral basis following earnings.

The 0.5% notes sank to 59.5 in early trading, a source said.

They were changing hands at 57.75 heading into the market close.

The small, illiquid issue last traded on April 11 on a 74-handle.

The notes were mostly held by outright accounts.

However, they contracted 5 points dollar-neutral on a theoretical hedge of 50%, a source said.

The notes dominated activity in the space with more than $25 million in reported volume.

Accolade’s stock traded to a low of $4.61 and a high of $6.48 before closing the day at $5.56, a decrease of 49.73%.

Stock was nearly cut in half after the health care technology company reported earnings.

The company beat expectations with a loss per share of 51 cents versus analyst expectations for a loss of 52 cents and revenue of $93.8 million versus analyst expectations for revenue of $91.6 million.

However, the stock tanked after the company cut its forward guidance and announced that it had lost a key customer, a source said.

Bilibili gains

While volume in the name was light, Bilibili’s 1.25% convertible notes due 2027 were a bright spot on an otherwise brutal day with the notes popping back above par as the company’s equity surged.

The 1.25% convertible notes jumped 5.5 points outright with the company’s American Depositary Shares up more than 10%.

The notes were changing hands at 104.5 on Friday.

The notes gained about 1.5 points on hedge, a source said.

Bilibili’s ADS traded to a high of $26.28 and a low of $24.30 before closing the day at $24.34, an increase of 9.79%.

The Shanghai-based video sharing website’s ADS surged on news Beijing was preparing to wind down its regulatory crackdown on the country’s tech behemoths.

Western Digital active

Western Digital’s 1.5% convertible notes due Feb. 1, 2024 remained active as opportunistic buyers turn toward the convertibles market for short-duration yield plays.

The 1.5% notes saw some large trades on a 96-handle during Friday’s session for a yield just north of 3.75%, a source said.

While Treasuries continue to creep higher, the notes still yield 100 bps more than the two-year Treasury note, which settled Friday with a yield of 2.723%.

Western Digital’s 1.5% convertible notes have been a staple on Trace volume over the past few weeks.

The notes have long been a yield play, a source said.

Exchangeables eyed

Liberty Broadband’s 2.75% senior debentures due 2050 exchangeable for Charter’s stock were active on Friday with the notes improved as Charter’s stock fell following earnings.

The 2.75% exchangeables were changing hands at 95.75 in the late afternoon.

They were improved dollar-neutral.

Charter’s stock traded to a high of $457.70 and a low of $415.01 before closing the day at $428.49, a decrease of 7.15%.

Charter’s stock sank after a mixed earnings report with the company besting expectations on the bottom line but missing on the top.

Charter reported earnings per share of $6.90 versus the $6.66 expected.

Revenue was $13.20 billion versus the $13.21 billion expected.

The 2.75% exchangeables are putable on Oct. 5, 2023. The notes were looking attractive on a yield-to-put basis, a source said.

Mentioned in this article:

Accolade Inc. Nasdaq: ACCD

Bilibili Inc. Nasdaq: BILI

Charter Communications, Inc. Nasdaq: CHTR

Western Digital Corp. Nasdaq: WDC

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