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Morning Commentary: Luckin Coffee sinks below par; China-based convertibles trade off
By Abigail W. Adams
Portland, Me., Jan. 27 – The secondary space was heavy on Monday as the spreading Coronavirus again weighed down markets.
In a remarkable reversal of fortunes, Luckin Coffee Inc.’s 0.75% convertible notes due 2025 dropped below par with the Beijing-based coffee shop chain’s ADS off as much as 8% soon after the opening bell.
The 0.75% convertible notes traded as low as 94.75 early in the session after closing out Friday around 101.
The notes were rebounding slightly as the underlying equity bounced off its lows. The 0.75% notes were changing hands just north of 97 about one hour into the session, according to a market source.
The notes continued to dominate activity in the secondary space with more than $12 million in reported volume early in the session.
Luckin Coffee’s equity traded as low as $36.48 early in the session. The ADS were changing hands at $37.74, a decrease of 7.57%, shortly before 11 a.m. ET.
The notes traded as high as 115 as recently as Jan. 17.
The convertibles of several China-based companies were selling off as the death toll from the pneumonia-like illness rises and confirmed cases spread to western countries.
Pinduoduo Inc.’s 0% convertible notes due 2024 dropped about 3 points outright to 111.45 early in the session.
The Shanghai-based e-commerce platform’s ADS were changing hands at $36.22, a decrease of 3.01%, shortly before 11 a.m. ET.
YY Inc.’s 0.75% convertible notes due 2025 dropped 2 points outright to 93.5.
The Guangzhou, China-based social media company’s ADS were changing hands at $57.92, a decrease of 2.32%, shortly before 11 a.m. ET.
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