Morning Commentary: ViacomCBS, iQIYI convertibles in focus on Archegos Capital unwind

By Abigail W. Adams

Portland, Me., March 29 – The convertibles secondary space was focused on ViacomCBS Inc.’s 5.75% series A mandatory convertible preferred stock and iQIYI Inc.’s convertible notes early Monday as market players braced for more volatility surrounding the unwinding of Archegos Capital Management’s positions in the companies.

Both companies were a part of the block trades that rattled markets on Friday due to the eye-popping number of shares for sale and the double-digit losses it inflicted on the companies’ equity.

The block trades were later revealed to be the result of Archegos Capital Management LLC unwinding its positions due to a margin call.

ViacomCBS’ losses since the pricing of its mandatory preferred stock and secondary offering on March 23 may have been a contributing factor to Archegos’ margin call, a source said.

While the 5.75% series A mandatory convertible preferred stock was trading off its lows early Monday, the company’s class B common stock continued its descent.

The mandatory convertible preferred stock was changing hands at $64.50 early in Monday’s session, a source said.

ViacomCBS’ stock traded down to $44.15, a decrease of 8.46%, shortly before 11 a.m. ET.

The preferred stock was marked at $59.875 bid late Friday.

Meanwhile, iQIYI’s convertible notes remained active as the Beijing-based online media company’s American Depositary Shares wavered between gains and losses early Monday.

iQIYI’s ADSs were a part of Friday’s selling spree, which drove the convertible notes down about 20 points outright and the ADSs down 13.2% at Friday’s close.

iQIYI’s 2% convertible notes gained 3 points outright early in the session.

They were changing hands at 93 versus a share price of $17.18 early.

iQIYI’s 4% convertible notes due 2026 were up 3.5 points outright.

They were changing hands at 102 versus a share price of $17.04, according to a market source.

iQIYI’s ADSs were wavering between gains and losses early in Monday’s session.

While the ADSs traded as high as $18.49, they were changing hands at $16.85, a decrease of 3.24%, shortly before 11 a.m. ET.

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