China convertibles sell-off continues; Coinbase notes down outright; JetBlue improves

By Abigail W. Adams

Portland, Me., July 27 – It was a red day for equity markets on Tuesday with benchmarks pulling back from their records as the Federal Open Market Committee meets.

While equities pared their losses into the close, benchmarks still ended the day in the red.

The Dow Jones industrial average closed the day down 86 points, or 0.24%, the S&P 500 index closed down 0.47%, the Nasdaq Composite index ended down 1.21% and the Russell 2000 closed the day down 1.13%.

The convertibles secondary space was quiet despite the volatility in equities with many on the sidelines, sources said.

There was $100 million on the tape about one hour into the session and $453 million in reported volume at the market close.

Losses continued to mount for the convertible notes of China-based companies.

Weibo Corp.’s short-dated 1.25% convertible notes due Nov. 15, 2022, Pinduoduo Inc.’s 0% convertible notes due 2025, Li Auto Inc.’s 0.25% convertibles due 2028 and 21Vianet Group Inc.’s 0% convertible notes due 2026 all continued to trend lower.

Despite the bloodbath in the China-based convertible notes, there was no panic selling.

The overall convertibles secondary space remained largely unchanged despite the losses in the sector, a source said.

Meanwhile, Coinbase Global Inc.’s 0.5% convertible notes due 2026 remained in focus with the notes down outright as stock gave back much of its gains from the previous session.

JetBlue Airways Corp.’s 0.5% convertible notes due 2026 were down outright but improved dollar-neutral with stock weak following the company’s second-quarter earnings report.

The sell-off

The sell-off in China-based convertible notes continued on Tuesday with several names hitting all-time lows.

“We haven’t seen prices like this in a long time,” a source said.

Weibo’s 1.25% convertible notes due Nov. 15, 2022 were marked at 94.5 bid, 95.25 offered in the late afternoon.

There was more than $24 million of the bonds on the tape.

Weibo’s American Depositary Shares traded to a high of $55.61 and a low of $51.25 before closing the day at $51.90, a decrease of 8.29%.

Pinduoduo’s 0% convertible notes due 2025 were marked at 87.5 bid, 89.25 offered.

There was more than $14 million of the bonds on the tape.

Pinduoduo’s ADSs traded to a high of $87.63 and a low of $77.66 before closing the day at $79.53, a decrease of 10.35%.

21Vianet’s 0% convertible notes due 2026 were marked at 77 bid, 78.5 offered.

There was more than $20 million in reported volume.

21Vianet’s ADSs traded to a high of $15.58 and a low of $14.11 before closing the day at $14.64, a decrease of 8.39%.

Li Auto’s 0.25% convertible notes due 2028 dropped 11 points outright.

They were marked at 113 bid, 114 offered heading into the market close.

However, volume in the name was light with a little more than $5 million on the tape.

Li Auto traded to a high of $30.45 and a low of $26.22 before closing the day at $26.48, a decrease of 13.94%.

While the bloodbath in Asian names continued on Tuesday, the notes remained liquid although bids continued to trend lower.

However, there was no panic selling. “No one’s running to the exit to raise money,” a source said.

The weakness in the sector also has yet to drag down the broader secondary space, which has been largely unchanged since the sell-off in Asian names began last Friday.

Coinbase in focus

Coinbase’s 0.5% convertible notes due 2026 continued to see high-volume activity on Tuesday with the notes down outright as stock gave back much of its gains from the previous session.

The 0.5% notes dropped 2 points outright with stock off more than 4%.

They were changing hands at 100.25 versus a stock price of $234.99 in the late afternoon.

Coinbase’s stock traded to a high of $243.21 and a low of $229.12 before closing the day at $235.08, a decrease of 4.22%.

Coinbase’s stock gained over 10% in intraday activity on Monday as Bitcoin rallied past $40,000 on rumors Amazon.com Inc. was considering accepting the digital currency as a form of payment.

However, Bitcoin pulled back after Amazon denied the claims.

Bitcoin traded to an intraday low of $36,419 but was changing hands at $38,024, an increase of 0.27%, shortly before 5 p.m. ET.

JetBlue’s earnings

JetBlue’s 0.5% convertible notes due 2026 were down outright but up dollar-neutral as stock traded off following the airline’s second-quarter earnings report.

The 0.5% convertible notes traded down to 98 in the late afternoon.

The notes improved about 0.5 point dollar-neutral.

JetBlue’s stock traded to a high of $15.60 and a low of $14.78 before closing the day at $14.96, a decrease of 6.91%.

Stock was trading off despite an earnings beat.

The airline reported adjusted losses per share of 64 cents versus analyst expectations for losses of 73 cents.

Revenue was $1.5 billion versus analyst expectations for revenue of $1.44 billion.

Mentioned in this article:

21Vianet Group Inc. Nasdaq: VNET

Coinbase Global Inc. Nasdaq: COIN

JetBlue Airways Corp. Nasdaq: JBLU

Li Auto Inc. Nasdaq: LI

Pinduoduo Inc. Nasdaq: PDD

Weibo Corp. Nasdaq: WB

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