Danimer in focus, skyrockets on debut; DigitalOcean, Affirm, Marathon Digital pressured

By Abigail W. Adams

Portland, Me., Dec. 17 – It was another volatile day in the convertibles secondary space on Friday with some new deals outperforming while losses mounted for others.

New paper from Danimer Scientific, Inc. dominated the tape with the notes skyrocketing outright and seeing a large dollar-neutral expansion.

However, several of November’s deals continued to trend lower.

Marathon Digital Holdings, Inc.’s 1% convertible notes due 2026, DigitalOcean Inc.’s 0% convertible notes due 2026 and Affirm Holdings Inc.’s 0% convertible notes due 2026 all hit new lows during Friday’s session.

Equity markets remained volatile on Friday.

While the Nasdaq Composite and Russell 2000 index launched the day deep in the red, they turned positive as the session progressed.

While the Russell 2000 was able to hold onto its gains, the Nasdaq Composite was not and ended the day in the red with other equity benchmarks.

The Dow Jones industrial average closed the day down 532 points, or 1.48%, the S&P 500 index closed down 1.03%, and the Nasdaq Composite closed down 0.07%.

However, the Russell 2000 index closed up 1%.

While the tech sector firmed as the day progressed, there were glimpses of panic in the convertibles secondary space early in the session with the Nasdaq off almost 1% shortly after the opening bell.

Bids for convertible bonds were being solicited from abroad as holders looked to exit their positions.

Some hedge funds were heard to have sold large blocks of bonds in some high-premium names, a source said.

Danimer outperforms

Danimer priced an upsized $200 million of five-year convertible notes after the market close on Thursday at par at the midpoint of talk with a coupon of 3.25% and an initial conversion premium of 27.5%.

Price talk was for a coupon of 3% to 3.5% and an initial conversion premium of 25% to 30%.

The greenshoe was also upsized to $40 million.

The initial size of the offering was $175 million with a greenshoe of $26.25 million.

The new paper was putting in a strong performance in the secondary space.

The notes traded up to a 103-handle with stock largely unchanged early in the session.

They continued to gain as stock improved as the session progressed.

The notes traded as high as 108 outright. They were changing hands at 106.75 versus a stock price of $8.91 in the late afternoon.

Danimer’s notes expanded 3 to 3.5 points on a dollar-neutral, or hedged, basis, sources said.

While there were not a lot of swap trades early in the session, hedge activity picked up in the afternoon with outright accounts selling.

There was $59 million in reported volume about one hour before the market close.

Danimer’s stock traded to a new 52-week low early in the session but turned positive as the market gained strength as the session progressed.

Danimer’s stock traded to a 52-week low of $8.20 and a high of $9.10 before closing the day at $8.90, an increase of 5.2%.

Stock also hit a 52-week low on Thursday as it tanked about 20% following the convertible notes offering.

Danimer marks the second convertible bond deal of the month to price off a 52-week low.

New lows

Losses continued to mount for several convertible bonds that priced in November.

DigitalOcean’s 0% convertible notes due 2026 continued to trade down even as stock gained strength on Friday.

The notes were off more than 1 point with stock up 3%.

They were changing hands at 86.25 versus a stock price of $73.33 in the late afternoon.

They contracted several points dollar-neutral, a source said.

There was more than $22 million in reported volume.

DigitalOcean’s stock traded to a low of $68.66 and a high of $74.61 before closing the day at $73.74, an increase of 3.64%.

DigitalOcean priced a $1.5 billion issue of the 0% notes at par in mid-November with an initial conversion premium of 50%.

The conversion premium on the notes is now 142%.

Affirm’s 0% convertible notes due 2026 also continued to trend lower.

They were changing hands at 88.02 versus a stock price of $100.23 in the late afternoon. There was $22 million in reported volume.

Affirm’s stock traded to a low of $92.34 and a high of $102.39 before closing the day at $98.77.

Affirm priced a $1.725 billion issue of the 0% notes at par with an initial conversion premium of 55% in mid-November.

The conversion premium on the notes is now 118%.

Marathon Digital’s 1% convertible notes due 2026 sank another 2 points outright with stock off more than 4%.

They were changing hands at 78.625 versus a stock price of $35.37 in the late afternoon.

There was about $9 million in reported volume.

Marathon Digital’s stock traded to a low of $32.38 and a high of $35.95 before closing the day at $33.86, a decrease of 4.66%.

The company priced a $650 million issue of the 1% notes at par with an initial conversion premium of 37.5% in mid-November.

The conversion premium for the notes is now 125%.

Mentioned in this article:

Affirm Holdings Inc. Nasdaq: AFRM

Danimer Scientific, Inc. NYSE: DNMR

DigitalOcean Inc. NYSE: DOCN

Marathon Digital Holdings, Inc. Nasdaq: MARA

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