Lucid convertibles skyrocket on takeout chatter; Coinbase gains; Pure Storage active

By Abigail W. Adams

Portland, Me., Jan. 27 – The convertibles primary market closed the last full trading week of January with no issuance with sources surprised by the lack of a calendar even with the earnings season blackout.

The primary market has cleared two deals totaling $1.75 billion thus far in January.

If no deals price during the final trading days of the month, this coming Monday and Tuesday, it will be the lightest volume January since 2016, according to the Prospect News database.

The primary market is projected to see an uptick of activity in 2023 after the historic lull of the previous year with new deal volume expected to be driven by companies tapping the convertibles market to address their refinancing needs.

However, those deals have yet to transpire with PRA Group, Inc. turning to the high-yield market to refinance its convertible notes this past week.

PRA priced a $400 million issue of 8 3/8% senior notes due 2028 (Ba2/BB+) on Monday to refinance its 3.5% convertible notes due June 1, 2023.

While the primary market has been slower than expected, it is still relatively early in the earnings season with only 25% of companies reporting, a source said.

Meanwhile, it was a relatively quiet day in the secondary space as equity indexes again wobbled between gains and losses in intraday activity as investors digested the December Consumer Price Expenditure report.

However, equity indexes closed in positive territory with the Dow Jones industrial average up 28 points, or 0.08%, the S&P 500 index up 0.25%, the Nasdaq Composite index up 0.95% and the Russell 2000 index up 0.59%.

There was $71 million on the tape a little more than one hour into the session and $420 million in reported volume about one hour before the market close.

While the overall market was quiet, Lucid Group Inc.’s 1.25% convertible notes due 2026 roared higher in heavy volume as stock catapulted upward on rumors the Saudi Public Investment Fund was eyeing a buyout of the company.

Coinbase Global Inc.’s 0.5% convertible notes due 2026 improved outright as stock jumped double digits on no news.

Pure Storage Inc.’s soon-to-mature 0.125% convertible notes due April 15, 2023 saw heavy volume on Friday with the notes contracting on the move up.

While CNX Resources Corp.’s 2.25% convertible notes due 2026 were active early in the session following earnings, the notes were unchanged and activity petered out as the session progressed.

Circuit breaker

Lucid’s 1.25% convertible notes due 2026 skyrocketed on Friday with trading of stock halted five times for triggering the Nasdaq circuit breaker.

The 1.25% notes opened Friday at 53 bid, 54 offered with little to no activity in the name.

That changed at approximately 12:30 p.m. ET when rumors ripped through the market that majority shareholder Saudi Arabia’s Public Investment Fund was eyeing a buyout of the remaining shares.

The 1.25% notes jumped more than 12.5 points to close the day wrapped around 66.

There was $36 million in reported volume with the notes dominating activity in the space.

“Lucid’s the only thing people are talking about this afternoon,” a source said.

While some market players may trade the notes on hedge, they have no theoretical delta, the source said.

Lucid’s stock traded to a low of $8.91 and a high of $17.81 before closing the day at $12.87, an increase of 43%.

Coinbase improves outright

Coinbase’s 0.5% convertible notes due 2026 improved outright as stock surged double digits on no news.

The 0.5% notes gained about 2 point outright with stock up more than 15%.

The notes were changing hands at 68.875 in the late afternoon with the yield 11.5%.

There was $10 million in reported volume.

Coinbase’s stock traded to a low of $52.41 and a high of $62.29 before closing the day at $61.37, an increase of 15.75%.

Pure Storage gains

Pure Storage’s soon-to-mature 0.125% convertible notes due April 15, 2023 saw heavy volume on Friday with the notes rising outright but contracting on the move up.

The 0.125% notes gained 3 points outright.

They were changing hands at 110.25 versus a stock price of $28.56 in the late afternoon.

There was $15 million in reported volume.

The notes were coming in on the move up with the notes now trading about 2 points above parity.

Pure Storage’s stock traded to a low of $27.97 and a high of $28.85 before closing at $28.30, an increase of 0.25%.

CNX’s earnings

CNX’s 2.25% convertible notes due 2026 were active early in the session following a large earnings beat, but the notes were unchanged and activity in the issue fizzled as the session progressed.

The 2.25% notes were seen at 145 versus a stock price of $16.66, according to a market source.

There was $5 million in reported volume.

CNX’s stock traded to a low of $16.11 and a high of $16.70 before closing at $16.53, an increase of 1.85%.

Much like its peers in the energy sector, the natural gas company blew past earnings expectations.

CNX reported earnings per share of $1.64 versus analyst expectations for earnings per share of 61 cents.

Revenue was $1.64 billion versus analyst expectations for revenue of $510.19 million.

Mentioned in this article:

CNX Resources Corp. NYSE: CNX

Coinbase Global Inc. Nasdaq: COIN

Lucid Group Inc. Nasdaq: LCID

Pure Storage Inc. NYSE: PSTG

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