Convertibles secondary ends volatile week better; Affirm, Pinduoduo, Airbnb, Lumentum up

By Abigail W. Adams

Portland, Me., March 18 – It was a quiet end to a volatile week in the convertibles secondary space with the tone dramatically improved as equities notched their fourth consecutive day of gains.

While mixed early in the session, indexes closed the day and the week with gains.

The Dow Jones industrial average closed Friday up 274 points, or 0.80%, the S&P 500 index closed up 1.17%, the Nasdaq Composite closed up 2.05% and the Russell 2000 index closed up 1.02%.

Activity in the secondary space was “anemic” early in the session with $32 million in reported volume about one hour into the session.

However, activity picked up as the session progressed with buyers reentering the space.

There was $400 million in reported volume about one hour before the close with several badly battered high-premium convertible notes improving alongside the broader market.

“Some of the dogs are having their day,” a source said.

Affirm Holdings Inc.’s 0% convertible notes due 2026 remained the most actively traded issue in the secondary space with the notes continuing to improve.

Pinduoduo Inc.’s 0% convertible notes due 2025 were again on the rise in active trading as the equity of China-based companies were again bolstered by positive comments from Beijing.

Airbnb Inc.’s 0% convertible notes due 2026 and Lumentum Holdings Inc.’s new 0.5% convertible notes due 2028 were also posting gains on an outright and dollar-neutral basis in active trading.

Affirm gains continue

Affirm’s 0% convertible notes due 2026 remained the most actively traded issue in the secondary space with the notes continuing to improve.

The bonds appeared to be outperforming the move in stock, a source said.

The notes gained another 2 points outright to trade just shy of 68 in the late afternoon, a source said.

Affirm’s stock continued its upward momentum after hitting a 52-week low on Monday.

Stock traded to a low of $36.38 and a high of $41.13 before closing the day at $40.71, an increase of 10.78%.

Since bottoming out on Monday, stock has gained more than 35% over the past week, a source said.

Affirm’s convertible notes hit an all-time low of 63 on Monday.

Pinduoduo rises

Pinduoduo’s 0% convertible notes due 2025 were again on the rise on Friday.

The 0% convertible notes traded up 1 point outright to 87.5 in the late afternoon, a source said.

There was $12 million in reported volume.

Pinduoduo’s American Depositary Shares resumed their climb with the notes trading to a low of $39.16 and a high of $45.97 before closing the day at $42.60, an increase of 8.20%.

Pinduoduo’s ADS have jumped more than 50% over the past four sessions after hitting a 52-week low on Monday.

The 0% convertible notes also traded to an all-time low of 80 on Monday.

Comments from Beijing pledging support to capital markets and overseas stock listings assuaged the delisting and regulatory crackdown concerns that sparked a sell-off in the ADR space.

While Pinduoduo’s ADS saw a meteoric rise over the past four sessions, the premium on the notes remains above 350%, a source said.

The notes largely trade for their yield.

Airbnb expands

Airbnb’s 0% convertible notes due 2026 were on the rise on an outright and dollar-neutral basis as stock continued to improve.

The 0% convertible notes gained about 2 points outright with stock up more than 5%.

They were changing hands at 96.625 in the late afternoon, a source said.

The notes gained about 0.375 point dollar-neutral, a source said.

Airbnb’s stock traded to a low of $155.70 and a high of $167.18 before closing the day at $167, an increase of 6%.

Lumentum improves

Lumentum’s new 0.5% convertible notes due 2028 were also on the rise during Friday’s session.

The 0.5% notes rose 2 points outright with stock up about 3%.

They were changing hands at 97 in the late afternoon.

The notes expanded about 0.25 point dollar-neutral, a source said.

Lumentum’s stock traded to a low of $91.12 and a high of $95.40 before closing the day at $95, an increase of 2.96%.

Lumentum’s convertible notes have rallied strongly after bottoming out at 93 on Monday.

The notes have struggled below par since Lumentum priced the $750 million issue at par on March 6.

Mentioned in this article:

Affirm Holdings Inc. Nasdaq: AFRM

Airbnb Inc. Nasdaq: ABNB

Lumentum Holdings Inc. Nasdaq: LITE

Pinduoduo Inc. Nasdaq: PDD

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