Bilibili convertibles pressured; EV makers drop on Tesla production delays; Coupa active

By Abigail W. Adams

Portland, Me., Jan. 27 – It was another volatile day in the convertibles secondary space on Thursday with equity markets launching the day strong but again closing in negative territory.

While up more than 1% early in the session, the Dow Jones industrial average closed the day down 7 points, or 0.02%, the S&P 500 index closed down 0.54% and the Nasdaq Composite index closed down 1.4%.

The Russell 2000 index continued to underperform with the index up 0.36% early in the session but down 2.29% by the market close.

The tone in the secondary space remained negative as selling pressure spilled over to the high-yield market.

While the high-yield market has been soft throughout the week amid the volatility in equities, it tanked on Thursday, sources said.

Market players had looked to the strength in high yields as a hopeful sign for a snap back recovery in the convertibles space.

There was $120 million in reported convertible bond trading about one hour into the session and $580 million on the tape about one hour before the close.

Bilibili Inc.’s 0.5% convertible notes due 2026 were among the most actively traded issue during the session with the notes continuing their downward spiral.

iQIYI Inc.’s 2% convertible notes due 2025 also saw a flurry of activity early in the session with the notes yielding more than 20%.

Lucid Group Inc.’s 1.25% convertible notes due 2026 and NIO Inc.’s 0% convertible notes due 2026 were also taking a hit on an outright basis as their equities declined in sympathy with Tesla Inc.

Coupa Software Inc.’s 0.375% convertible notes due 2026 were active with holders switching out of the notes in favor of the software company’s higher priced bonds.

ADRs under pressure

Bilibili’s 0.5% convertible notes continued to trade lower on an outright basis with the company’s equity deep in the red.

The 0.5% convertible notes were changing hands at 75.25 versus an equity price of $30.65 early in the session, according to a market source.

They fell to 74.875 in the afternoon.

The notes now carry a yield north of 11%.

There was $13.5 million in reported volume in the late afternoon.

The Shanghai-based video sharing website’s American Depositary Shares traded to a high of $32.51 and a low of $30.01 before closing the day at $30.25, a decrease of 5.79%.

iQIYI’s 2% convertible notes due 2025 also saw a flurry of activity early in the session as the company’s equity gyrated between gains and losses.

The 2% convertible notes were up about 0.75 point outright. They were changing hands at 76.5 with a yield of 26.68%.

The notes become putable on April 1, 2023.

The Beijing-based online entertainment service provider made good on the put option for its 3.75% convertible notes due 2023.

iQIYI’s American Depositary Shares traded to a high of $3.68 and a low of $3.40 before closing the day at $3.42, a decrease of 4.07%.

There was no news in particular that sparked the activity in the notes.

However, China’s Shanghai Composite closed the day down 1.78%, which may have been a catalyst to offload the notes, a source said.

EV makers take a hit

Electric vehicle manufacturers were taking a hit on Thursday in sympathy with Tesla, which announced fourth-quarter results after the market close on Wednesday.

Lucid’s 1.25% convertible notes due 2026 continued to sink on an outright basis.

The notes were down about 4.5 points outright with stock off more than 14%.

They were changing hands at 84.25 versus a stock price of $29.59 in the late afternoon.

There was about $10 million in reported volume.

While the notes sank outright causing more pain for outright accounts, they were moving in line on a dollar-neutral basis.

Lucid’s stock traded to a high of $33.91 and a low of $28.39 before closing the day at $28.70, a decrease of 14.10%.

Nio’s 0% convertible notes due 2026 were active with the notes continuing to trade near their bond floor.

The 0% convertible notes were changing hands at 84.875 versus an equity of $21.31. The notes now yield 8.373%.

There was about $11 million in reported volume.

The Shanghai-based electric vehicle manufacturer’s American Depositary Shares traded to a high of $22.81 and a low of $20.96 before closing the day at $21.11, a decrease of 6.84%.

The company’s 4.5% convertible notes due 2024 are putable at par through Jan. 28.

However, the notes, which priced when the company’s equity was $7.46, were changing hands at triple par in December, according to Trace data.

EV makers across the board saw large drops in their equity as Tesla warned about a slowdown in production due to supply chain issues.

Coupa active

Coupa’s 0.375% convertible notes due 2026 were active on Thursday as holders switched out of the busted notes for their higher priced counterparts.

The 0.75% notes were changing hands at 87.875 with stock at $123.56 in the late afternoon, according to a market source.

There was about $12 million in reported volume.

The conversion premium on the notes is almost 150%.

Holders were selling the 0.375% notes to switch into the 0.125% convertible notes due 2025, which still have some optionality to them, a source said.

The 0.125% notes were changing hands at 108.5 on the Thursday.

Coupa’s stock traded to a high of $128.57 before closing the day at the session low of $120.07, an increase of 0.33%.

The conversion price for the 0.375% notes is $296.45; the conversion price for the 0.125% notes is $159.60.

Mentioned in this article:

Bilibili Inc. Nasdaq: BILI

Coupa Software Inc. Nasdaq: COUP

iQIYI Inc. Nasdaq: IQ

Lucid Group Inc. Nasdaq: LCID

NIO Inc. NYSE: NIO

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.