China-based convertible notes in focus; Weibo gains; Pinduoduo, iQIYI trade below par

By Abigail W. Adams

Portland, Me., July 6 – It was another slow start to the week with the convertibles primary market dormant and trading volume light in the convertibles secondary space.

The convertibles primary market is expected to be slow throughout the week with some sources forecasting a dry week for new deal activity and others expecting a deal or two.

With the market soon entering into earnings season blackouts, the window of opportunity for new deals is narrow, sources said.

While trading activity was light in the convertibles secondary space with $250 million in reported volume about one hour before the market close, China-based companies were in focus.

Pinduoduo Inc.’s 0% convertible notes due 2025 again dropped below par with the Shanghai-based e-commerce company’s equity under pressure as China accelerated its clampdown on its tech sector following Didi Global Inc.’s IPO last week.

iQIYI Inc.’s 4% convertible notes due 2026 also dropped below par.

However, Weibo Corp.’s 1.25% convertible notes due 2022 were on the rise on rumors the Beijing-based social media platform was in talks to go private.

Under pressure

The convertible notes of China-based companies were under pressure in active trading as China intensified its regulatory scrutiny of the tech sector.

Pinduoduo’s 0% convertible notes due 2025 again dropped below par on Monday after rebounding the previous week as U.S.-China relations improved.

The notes dropped about 3 points outright to 98.5 early in the session.

However, they pared their losses as the session progressed and were changing hands on a 99-handle heading into the afternoon.

There was about $5 million of the bonds on the tape.

Pinduoduo’s American Depositary Shares traded to a low of $111.25 and a high of $115.44 before closing the day at $113.10, a decrease of 5.12%.

iQIYI’s 4% convertible notes due 2026 were also trading off on an outright basis.

The 4% convertible notes dropped about 5 points outright.

The notes were changing hands at 97 in the late afternoon. There was more than $5 million on the tape.

iQIYI’s ADSs traded to a high of $14.82 and a low of $14.11 before closing the day at $14.40, a decrease of 3.81%.

Following what was hailed as a blockbuster IPO, China launched a review of Didi Global and found that the ride-sharing company was allegedly committing violations in relation to the collection and use of data on its customers – a complaint similar to the one used in China’s regulatory clampdown of the Ant Group Co.

Didi’s app was pulled from stores and China has vowed to tighten its oversight of overseas listings, Bloomberg reported.

Weibo gains

While volume in the name was light, Weibo’s 1.25% convertible notes due 2022 were posting gains on rumors the Beijing-based social media platform was in talks with investors to go private.

The 1.25% notes traded up to 99.

However, the convertible notes were not firmly bid at those prices with the market more like 97.5 bid, 99 offered, a source said.

The 1.25% notes were on a 97-handle the previous week.

Weibo’s ADSs traded as high as $62.76 and as low as $57.50 before closing the day at $57.74, an increase of 6.32%.

They were up as much as 20% premarket.

Weibo’s ADSs popped following media reports that the company is in talks with its largest shareholder, New Wave, and a Shanghai-based state firm to go private with an offer price of $90 to $100 a share, Reuters reported.

The deal would allow Alibaba, a major shareholder, to exit its position in the company and appease regulators attempting to reign in Alibaba’s influence.

However, Weibo’s chairman has denied the report.

If the reports were accurate, the convertible notes would net a 1.5 point gain if the take out price were in the mid- to high $90s, a source said.

However, the gains would be nominal if the takeout price were in the low $90s.

Mentioned in this article:

iQIYI Inc. Nasdaq: IQ

Pinduoduo Inc. Nasdaq: PDD

Weibo Corp. Nasdaq: WB

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