Southwest Airlines convertible notes expand; Beyond Meat improves; Pinduoduo active

By Abigail W. Adams

Portland, Me., July 8 – The convertibles secondary space continued to see an uptick of activity as equity benchmarks sold off with the Nasdaq Composite and S&P 500 index ending a nearly week-long winning streak.

While benchmarks pared their losses as the session progressed, each closed the day firmly in the red with the Dow Jones industrial average down 259.86 points, or 0.75%, the S&P 500 index down 0.86%, the Nasdaq Composite down 0.72% and the Russell 2000 index down 1.27%.

Concern over the impact of the Delta variant of Covid-19 on the economic recovery was pointed to as the cause of Thursday’s pullback.

However, given the S&P 500’s and Nasdaq Composite’s strong run recently, the market was most likely looking for a reason to pull back, sources said.

There was $100 million of convertible bonds on the tape about one hour into the session and $422 million in reported volume heading into the market close.

While there continued to be an uptick of trading volume on Thursday, there was no clear theme to the activity.

Some market players were selling higher dollar-price bonds for lower ones as a defensive play, a source said.

Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) were the most actively traded name in the secondary space with the notes expanding dollar-neutral.

Beyond Meat Inc.’s 0% convertible notes due 2027 were also improved dollar-neutral.

Pinduoduo Inc.’s 0% convertible notes due 2025 remained active with the notes continuing to trade down on an outright basis.

Bentley Systems Inc.’s convertible notes also saw some action as the engineering software company’s stock sank alongside the broader market.

Southwest expands

Southwest Airlines’ 1.25% convertible notes due 2025 were the most actively traded name in the secondary space on Thursday with the notes expanding in the high-volume activity.

The notes were “all over the place” as stock wavered between gains and losses throughout the session, a source said.

However, they were changing hands at 148.5 versus a stock price of $51 shortly before the close.

The notes expanded about 0.5 point dollar-neutral.

There was more than $13 million in reported volume.

Southwest’s stock traded to a high of $51.91 and a low of $50.10 before closing the day at $51.19, a decrease of 0.37%.

Beyond Meat improves

While Beyond Meat’s 0% convertible notes due 2027 remained well below par, the notes improved on a dollar-neutral basis on Thursday.

The 0% convertible notes continued to trade on a 97-handle.

They were changing hands at 97.625 versus a stock price of $139.84 in the late afternoon.

The notes improved about 0.5 point on a hedged basis, a source said.

There was more than $7 million in reported volume.

Beyond Meat’s stock traded to a high of $142.99 and a low of $137 before closing the day at $139.23, a decrease of 0.79%.

Beyond Meat’s convertible notes have been volatile alongside the plant-based food company’s stock.

The convertible notes closed out the previous week at 101. However, they dropped below par as stock sold off over the past two sessions.

Pinduoduo active

Pinduoduo’s 0% convertible notes due 2025 remained active with the notes continuing to trade down on an outright basis.

The 0% convertible notes were off another 0.75 point outright with stock down a little over 1% during Thursday’s session.

They were changing hands at 97.5 versus a stock price of $109.48 in the late afternoon.

There was $10 million in reported volume.

The Shanghai-based e-commerce company’s ADSs traded to a low of $103.30 and a high of $109.90 before closing the day at $108.77, a decrease of 1.38%.

Pinduoduo’s convertible notes have been active throughout the week with the convertible notes and equity of China-based companies under pressure as China ramps up its crackdown on its tech behemoths.

The bad news continued to mount for China-based companies on Thursday with the Cyberspace Administration of China launching an interagency effort to increase its oversight of companies listed overseas.

The S&P 500, Dow Jones Indices and FTSE Russell also announced late Wednesday that 25 additional Chinese companies would be removed from their indices to comply with an executive order signed by president Joe Biden in June.

The executive order expanded the scope of the China-based companies U.S. investors are barred from doing business with due to their ties to the military.

Bentley on the tape

Bentley Systems’ 0.125% convertible notes due 2026 were also active on Thursday with the notes trading down alongside stock.

The notes dropped about 2 points outright with stock down upwards of 5%.

The 0.125% notes were changing hands at 118.25 versus a stock price of $64.13 early in the session.

They continued to trend lower as the session progressed and were changing hands at 117.875 versus a stock price of $63.06 in the late afternoon.

There was about $7 million in reported volume.

While volume in the issue was light, Bentley Systems’ recently priced 0.375% convertible notes due 2027 were down about 0.625 point outright.

They were changing hands at 102.5 with about $2 million on the tape early in the session.

Bentley Systems’ stock traded to a low of $62.05 and a high of $64.97 before closing the day at $63.81, a decrease of 2.98%.

Bentley Systems announced post-close Wednesday that it had acquired geophysical software company Aarhus GeoSoftware.

Bentley Systems priced a $575 million issue of the 0.375% notes on June 23. It was the most recent new deal to clear the primary market.

Mentioned in this article:

Bentley Systems Inc. Nasdaq: BSY

Beyond Meat Inc. Nasdaq: BYND

Pinduoduo Inc. Nasdaq: PDD

Southwest Airlines Co. NYSE: LUV

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