Redfin, DraftKings convertibles down following earnings; Upstart gives back some gains

By Abigail W. Adams

Portland, Me., Feb. 18 – The convertibles secondary space was quiet on Friday as equity indexes wavered between gains and losses before selling off to close the day in the red.

The Dow Jones industrial average closed the day down 232 points, or 0.68%, the S&P 500 index closed down 0.72%, the Nasdaq Composite closed down 1.23% and the Russell 2000 index closed down 1.03%.

However, it was “very quiet” in the convertibles secondary space after an active trading week with $56 million in reported volume one hour into the session and $453 million on the tape heading into the market close.

Earnings-related news continued to be the main driver of trading activity on Friday with Redfin Corp.’s convertible notes in focus as stock cratered.

The already struggling convertible notes sank further on an outright and dollar-neutral basis following the stock move.

DraftKings Inc.’s 0% convertible notes due 2028 were also down in active trading as stock plummeted following its earnings report.

However, the notes were largely moving in line dollar-neutral.

While Upstart Holdings Inc.’s 0.25% convertible notes due 2026 were a bright spot throughout the week as stock skyrocketed post-earnings, the notes were giving back some of their gains as stock came in on Friday.

Redfin in focus

Redfin’s convertible notes were under pressure in active trading on Friday as the Seattle-based real estate technology company’s stock cratered following earnings.

The 0.5% convertible notes due 2027 and 0% convertible notes due 2025 were down on an outright and dollar-neutral basis.

The 0.5% convertible notes due 2027 fell 4.5 points outright with stock off 20%.

They were changing hands at 69 heading into the market close.

The notes were contracted about 1.5 points dollar-neutral.

There was $16 million in reported volume.

The 0% convertible notes due 2025 sank 3 points outright to trade down to 77.

They also contracted about 1.5 points dollar-neutral on the move down.

There was about $22 million in reported volume.

While both convertible issues carry a high premium, they were trading on a 50% to 60% delta with volatility in the stock high, a source said.

Redfin’s stock traded to a low of $20.44 and a high of $23.90 before closing the day at $22.86, a decrease of 20.18%.

While the company beat on both the top and bottom lines, stock cratered as guidance missed expectations.

Redfin reported a loss per share of 27 cents, which was narrower than the loss of 31 cents expected. Revenue was $643 million versus the $598 million expected.

DraftKings active

DraftKings’ 0% convertible notes due 2028 were also active as stock tanked following earnings.

The already struggling convertible notes sank lower on an outright basis.

However, the notes were relatively unchanged on a dollar-neutral basis.

The 0% convertible notes were down 2.625 points outright with stock off 20%.

They were changing hands at 73.125 versus a stock price of $17.81 in the late afternoon.

There was $14 million in reported volume.

DraftKings’ stock traded to a high of $19.48 and a low of $17.22 before closing the day at $17.29, a decrease of 21.62%.

Upstart gives back gains

While Upstart’s 0.25% convertible notes due 2026 were a rare shade of green on an otherwise red week, they were giving back some of their gains during Friday’s session.

The 0.25% convertible notes fell 2.625 points outright with stock off more than 6%.

They were trading at 92.75 versus a stock price of $132.20 in the late afternoon.

There was about $10 million in reported volume.

Upstart’s stock traded to a high of $144.28 and a low of $126.42 before closing the day at $130.05, a decrease of 6.86%.

The 0.25% notes dominated activity in the secondary space on Wednesday climbing more than 9 points outright and expanding 1.5 points to 2.5 points dollar-neutral after a surprise earnings beat.

Mentioned in this article:

DraftKings Inc. Nasdaq: DKNG

Redfin Corp. Nasdaq: RDFN

Upstart Holdings Inc. Nasdaq: UPST

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