Secondary better to buy; Sea, Coinbase hit highest level since pricing; iQIYI improves

By Abigail W. Adams

Portland, Me., Oct. 19 – The convertibles primary market remained quiet on Tuesday, marking the third week with no new deal activity.

However, the lack of new paper continued to lift the secondary space, which was again better to buy, as market players turned to outstanding issues to put their money to work, a source said.

Equity markets saw a strong session, despite a rising 10-year Treasury yield which closed Tuesday at 1.638%.

Some have speculated that even with an elevated Treasury yield, the yield was negative compared to inflation, causing many to take their chances in higher risk areas in hopes for a return.

The Dow Jones industrial average closed the day up 199 points, or 0.56%, the S&P 500 index closed the day up 0.74%, the Nasdaq Composite closed up 0.71% and the Russell 2000 index closed up 0.36%.

There was $100 million in reported volume a little more than one hour into the session and $472 million on the tape about one hour before the market close.

Sea Ltd.’s 0.25% convertible notes due 2026 continued to top the volume charts with the notes hitting their highest outright level since pricing.

Coinbase Global Inc.’s 0.5% convertible notes due 2026 also hit their highest level since pricing as stock continued to surge on the heels of the trading debut of a Bitcoin ETF.

The convertible notes of several China-based companies were also lifted on Tuesday following news reports that China Evergrande Group made interest payments on one of its yuan-denominated-bonds.

While volume in the name was light, iQIYI Inc.’s convertible notes improved as the company’s equity jumped on the news.

Sea in focus

Sea’s 0.25% convertible notes due 2026 continued to see heavy volume with the notes again hitting their highest outright level since pricing.

The 0.25% convertibles were changing hands at 108.125 versus an equity price of $367.61 early in the session.

They continued to trade on a 108-handle as the session progressed.

While the notes gained outright, they were largely moving in line dollar-neutral, a source said.

There was more than $25 million in reported volume.

Sea’s American Depositary Shares traded to a low of $360.52 and a high of $372.70 before closing the day at $366.99, an increase of 2.77%.

Coinbase surges

Coinbase’s 0.5% convertible notes due 2026 continued their upward momentum on Tuesday with the notes also hitting their highest outright level since pricing.

The notes were up about 3 points outright with stock up over 4%.

They were changing hands just shy of 115 heading into the market close, a source said.

Coinbase’s stock traded to a low of $294.11 and a high of $307.85 before closing the day at $305.63, an increase of 4.19%.

Stock has surged more than 20% over the past five sessions as Bitcoin broke past $60,000, a key resistance level, and came within inches of breaking its previous high of $65,000.

Bitcoin was trading at $64,290, an increase of 4.91%, shortly before 5 p.m. ET.

Bitcoin and Coinbase have surged over the past week due to Securities and Exchange Commission approval for a futures-based Bitcoin ETF, which made its trading debut on Tuesday.

The ProShares Bitcoin Strategy ETF, which trades on the NYSE American under the ticker “BITO,” closed Tuesday at $41.94, an increase of 4.85%.

The ETF was the second-most heavily traded ETF on Tuesday with almost $1 billion in trading volume, Bloomberg reported.

iQIYI improves

The convertible notes of several China-based companies were lifted on Tuesday following news reports that China Evergrande Group made interest payments on some of its onshore bonds.

While volume in the name was light, iQIYI’s convertible notes improved alongside its equity.

The Beijing-based online entertainment service provider’s 4% convertible notes were up about 1 point outright to change hands at 90.5.

The 2% convertible notes due 2025 were also up about 1 point outright to trade at 90.

iQIYI’s American Depositary Shares traded to a low of $8.70 and a high of $9.77 before closing the day at $9.60, an increase of 12.94%.

While the company’s ADSs surged on Tuesday, the premium on the convertible notes remains more than 100% to 200%, respectively.

The convertible notes have been beaten down since Beijing launched its regulatory crackdown on private industry.

Fears of an economic meltdown sparked by China Evergrande Group defaulting on its massive debt load have compounded pressure on China-based companies.

While China Evergrande Group made interest payments on its onshore bonds, it has missed interest payments on two of its dollar-denominated bonds.

Mentioned in this article:

Coinbase Global Inc. Nasdaq: COIN

iQIYI Inc. Nasdaq: IQ

Sea Ltd. NYSE: SE

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