VNET convertible notes active as put nears; crypto names rally on ETF hopes; Redfin up

By Abigail W. Adams

Portland, Me., Oct. 24 – While the convertibles primary market remained dormant on Tuesday, the secondary space saw an uptick of activity as markets continued to rebound from recent heaviness.

Equity indexes broke their losing streak and made strong gains on Tuesday after a better-than-expected Purchasing Managers’ Index pointed to continued business strength, raising expectations for key earnings reports ahead.

The Dow Jones industrial average closed Tuesday up 205 points, or 0.62%, the S&P 500 index closed up 0.73%, the Nasdaq Composite index closed up 0.93% and the Russell 2000 index closed up 0.82%.

There was $85 million in reported convertibles trading volume about one hour into the session and $514 million on the tape about one hour before the market close.

While high-grade names continued to see heavy volume, topical news sparked movement in some outstanding issues.

VNET Group, Inc.’s (formerly 21Vianet Group Inc.) 0% convertible notes due 2026 were active as the put date approaches.

While the notes were trading with a yield that implied deep skepticism about the Beijing-based internet data center services provider’s ability to honor the put, the company recently received approval to raise its share capital.

Tuesday was crypto’s day with several crypto-exposed convertible notes rallying as Bitcoin surged on expectations for Securities and Exchange Commission approval of Bitcoin ETFs.

Coinbase Global, Inc.’s 0.5% convertible notes due 2026 and MicroStrategy Inc.’s convertible notes made large gains on the news.

Redfin Corp.’s beleaguered convertible notes also surged on Tuesday after Apollo Global Management extended the company a $250 million lifeline with proceeds to be used to buy back a portion of its outstanding convertible notes.

VNET’s put

VNET’s 0% convertible notes due 2026 were unchanged in active trade on Tuesday as the company’s put date approaches.

The 0% convertible notes were wrapped around 73.5 with a yield to put of 136.625% in heavy volume, a source said.

While the off-the-run issue rarely trades en masse, the notes were among the top traders of Tuesday’s session with $12 million in reported volume.

The notes become putable on Feb. 1, 2024.

The convertibles were trading with heavy skepticism about the Beijing-based data-center’s ability to honor the put, a source said.

The company currently has $345 million in cash on its balance sheet.

It is carrying $1.549 billion in debt, $600 million of which is the 0% convertible notes, the source said.

However, the company received shareholder approval to increase its share capital at an extraordinary general meeting on Oct. 5, according to a company press release.

The authorization enabled the creation of an additional 1.5 billion class A ordinary shares.

VNET’s American Depositary Shares traded to a low of $2.76 and a high of $3.02 before closing at $2.99, an increase of 9.12%.

Crypto fever

Crypto names were in focus on Tuesday as Bitcoin surged with the market expecting imminent SEC approval of Bitcoin ETFs.

Coinbase’s 0.5% convertible notes due 2026 were higher on the news.

The 0.5% convertible notes jumped 1.25 points outright to trade at 77.5 early in the session.

They came in slightly as the session progressed and were trading at 77 versus a stock price of $82.39 in the late afternoon, according to a market source.

The yield was 10.875% heading into the market close.

There was $16 million in reported volume.

Coinbase’s stock traded to a low of $80.89 and a high of $89.40 before closing at $82.07, up 6.29%.

MicroStrategy’s convertible notes also surged in active trade.

The 0.75% convertible notes due 2025 jumped 8 points with stock up more than 12%.

They were changing hands at 126.5 versus a stock price of $424.49 in the late afternoon, according to a market source.

The 0.75% notes entered into in-the-money territory again with MicroStrategy’s stock trading above the notes’ $397.99 conversion price for the first time since August.

There was $11 million in reported volume.

MicroStrategy’s heavily busted 0% convertible notes due 2027 gained 2 points outright in light volume.

They were trading just shy of 74 versus a stock price of $410.95 early in the session, according to a market source.

The yield was 9.375%.

There was $2 million in reported volume.

MicroStrategy’s stock traded to a low of $401.27 and a high of $438.99 before closing at $424.87, an increase of 12.55%.

Crypto names were in focus as Bitcoin surged more than 12% in intraday activity to brush up against the $35,000 technical resistance level.

The crypto fever erupted after a U.S. appeals court formalized Grayscale’s victory over the SEC on Monday and ordered the SEC to again review Grayscale’s application to turn its Bitcoin Trust into an ETF.

Several institutional investors have Bitcoin ETF applications pending with the SEC.

Coinbase is listed as a partner in a majority of the pending applications.

Redfin surges

Redfin’s beleaguered convertible notes surged on Tuesday following news Apollo extended the online real estate company a $250 million line of credit with proceeds to be used to buy back a portion of its convertible notes.

The 0.5% convertible notes due 2027 jumped 6 points outright in heavy volume.

They traded up to a 58-handle and closed the day wrapped around 58.25, a source said.

The yield was 17%.

There was $13 million in reported volume.

Redfin’s 0% convertible notes due 2025 jumped 3 points outright.

They traded up to an 81-handle and were wrapped around 81.5 heading into the market close.

While the convertibles are not equity sensitive, Redfin’s stock saw a strong session and closed at $5.36, an increase of 5%.

Mentioned in this article:

Coinbase Global, Inc. Nasdaq: COIN

MicroStrategy Inc. Nasdaq: MSTR

Redfin Corp. Nasdaq: RDFN

VNET Group, Inc. Nasdaq: VNET

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