Plug Power craters on going concern; Pinduoduo convertibles up; National Vision gains

By Abigail W. Adams

Portland, Me., Nov. 10 – The convertible secondary space saw a quiet but firm end to the week as equity markets brushed off the weakness of the previous session to close the day with strong gains.

While Federal Reserve chair Jerome Powell’s hawkish comments on Thursday cast a shadow over market expectations for an end to the rate hike campaign, risk-on sentiment returned to markets on Friday with Treasuries leveling off after Thursday’s disastrous 30-year bond auction.

The Dow Jones industrial average closed Friday up 391 points, or 1.15%, the S&P 500 index closed up 1.56%, the Nasdaq Composite index closed up 2.05% and the Russell 2000 index closed up 1.07%.

There was $50 million in reported volume about one hour into the session and $350 million on the tape about one hour before the market close with few names seeing concentrated trading activity.

However, earnings-related volatility continued to spark large price movements in the space.

Plug Power Inc.’s 3.75% convertible notes due 2025 cratered in heavy volume after the alternative energy company issued a going-concern statement alongside a large earnings miss.

Pinduoduo Inc.’s 0% convertible notes due 2025 edged higher in active trade as the put date for the notes approaches.

National Vision Holdings Inc.’s 2.5% convertible notes due 2025 were on the rise in active trade with the company’s buyback of a portion of the notes boosting the secondary trading level of the remaining outstanding amount.

Splunk Inc.’s 1.125% convertible notes due 2025 also saw some activity on Friday although with little movement in price.

Plug’s downfall

Plug Power’s 3.75% convertible notes due 2025 cratered on Friday after the company issued a going-concern statement alongside a large earnings miss.

The 3.75% notes plunged 27 points outright with stock off 43% and contracted several points dollar-neutral on the move down, a source said.

The 3.75% notes were changing hands at 75.5 versus a stock price of $3.30 in the late afternoon, a source said.

The yield on the notes shot up to 23.5% after previously having a negative yield.

There was $15 million in reported volume.

Plug Power’s stock traded to a high of $4.18 and a low of $3.22 before closing at $3.54, a decrease of 40.30%.

The 3.75% convertible notes were in-the-money heading into Friday’s earnings release with the notes trading at 132.

At their height, the notes traded at double par.

However, the hydrogen fuel cell systems company announced the end of its glory days after a large earnings miss with the company issuing a going-concern warning.

Plug Power announced losses per share of 45 cents versus analyst expectations for losses of 30 cents.

Revenue was $198.71 million versus the $221.73 million expected.

The company announced it will need to secure additional financing to fund its operations and was evaluating debt financing options.

Pinduoduo’s put

Pinduoduo’s 0% convertible notes due 2025 edged higher in active trade as the notes’ put date approaches.

The 0% notes were up about 0.25 point outright.

They were trading at 99.625 in the late afternoon.

There was $11 million in reported volume.

The notes were trading with little doubt the Shanghai-based e-commerce company will honor the put, a source said.

The notes are putable at par on Dec. 1.

National Vision gains

National Vision Holdings’ 2.5% convertible notes due 2025 were on the rise in active trade after the company posted a large earnings beat and announced a $100 million buyback of the notes.

The company announced it had entered into privately negotiated transactions with certain holders of the 2.5% notes to repurchase $100 million in principal for $99.25 million.

Approximately $302.5 million in principal will remain outstanding following the completion of the buyback, according to a company press release.

The buyback price was “hefty” and lifted the 2.5% notes with holders anticipating additional buybacks, a source said.

The 2.5% notes gained about 3 points outright.

They were trading at 97 early in the session and seen at 98.75 versus a stock price of $18.25 in the late afternoon, sources said.

There was $8 million in reported volume.

National Vision’s stock traded to a low of $17.50 and a high of $18.88 before closing at $18.43, an increase of 6.29%.

The convertible notes buyback was announced alongside a large earnings beat.

National Vision posted earnings per share of 15 cents versus the 10 cents analysts expected on revenue of $532.36 million versus the $526.72 million expected.

Splunk active

Splunk’s 1.125% convertible notes due 2025 saw some action early in the session although activity in the name tempered as the session progressed.

While active, the notes saw little movement in price.

The 1.125% notes were wrapped around 107.6 in early trade.

There was $6 million in reported volume.

Splunk’s stock traded to a low of $146.46 and a high of $147.15 before closing at $147, up 0.31%.

Splunk’s 1.125% convertible notes due 2025 have largely traded on a 107-handle since Cisco Systems Inc. announced its acquisition of the company for $157 per share in an all-cash transaction in September.

The deal is expected to close in the third quarter of 2024.

Splunk recently announced it was laying off about 7% of its workforce in preparation for the acquisition.

Mentioned in this article:

National Vision Holdings Inc. Nasdaq: EYE

Pinduoduo Inc. Nasdaq: PDD

Plug Power Inc. Nasdaq: PLUG

Splunk Inc. Nasdaq: SPLK

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