Coinbase convertibles rise; RealReal trades; Starwood notes hit new outright heights

By Abigail W. Adams

Portland, Me., July 11 – It was another quiet day in the convertibles secondary space on Tuesday with few making moves ahead of the Wednesday release of the Consumer Price Index report and the start of earnings.

Equity indexes were in the green with the Dow Jones industrial average closing Tuesday up 317 points, or 0.93%, the S&P 500 index closing up 0.67%, the Nasdaq Composite index closing up 0.55% and the Russell 2000 index closing up 0.96%.

There was $60 million in reported volume about one hour into the session and $362 million in reported volume about one hour before the market close.

While the broader market remained quiet, there was movement in the convertible notes of issuers with heavily shorted stocks, which were on a tear on Tuesday.

Coinbase Global, Inc.’s 0.5% convertible notes due 2026 was one of the most actively traded names in the secondary space with the notes on the rise as stock jumped double digits.

The RealReal Inc.’s 3% convertible notes due 2025 saw a resurgence of liquidity as stock also climbed double digits during Tuesday’s session.

Starwood Property Trust Inc.’s recently priced 6.75% convertible notes due 2027 (/BB-) traded up to their highest outright level since hitting the secondary space in late June, although the notes were moving in line dollar-neutral.

Coinbase rises

Coinbase’s 0.5% convertible notes due 2026 were on the rise in active trade on Tuesday as stock jumped double digits, partly due to topical news and partly due to a rally in heavily shorted stocks.

The 0.5% notes gained 1 point.

They were changing hands at 76.5 versus a stock price of $88.28 in the late afternoon, according to a market source.

The yield was about 10%.

There was $14 million in reported volume.

Coinbase’s stock traded to a low of $80.49 and a high of $92.15 before closing at $89.15, an increase of 9.78%.

Coinbase’s stock soared after Cboe filed an amendment to its five Bitcoin ETF applications that named Coinbase as its partner in a surveillance-sharing agreement.

Coinbase also entered into a surveillance-sharing agreement with BlackRock for its planned Bitcoin ETF.

Coinbase’s 0.5% convertible notes slumped in early June after the Securities and Exchange Commission filed suit against the crypto-exchange for trading tokens, which the SEC claims are unregistered securities; the case is pending.

However, Coinbase’s stock and convertible notes have eliminated all losses and are now trading at a higher level than prior to the lawsuit with ETF applications from institutional investors propelling Bitcoin to a 52-week high.

Coinbase is also a heavily shorted name with a short interest of 20%.

RealReal trades

RealReal’s 3% convertible notes due 2025 were back on the tape on Tuesday with the company among the heavily shorted small cap stocks that surged during the session.

The 3% convertible notes, which have not seen a round-lot trade since late June, traded up to a 69-handle on Tuesday.

The notes were changing hands at 69.25 with a yield of 23.875% in the late afternoon.

“It’s a new price point for them,” a source said.

The luxury consignment shop’s notes do not trade on hedge.

However, the surge in stock sparked some liquidity in the issue with $5.5 million in reported volume.

RealReal’s stock closed Tuesday at $2.64, an increase of 19.46%.

The company was one of many heavily shorted stocks that surged on Tuesday with short interest in the name about 15%.

Starwood’s new heights

Starwood’s 6.75% convertible notes due 2027 climbed to their highest outright level on Tuesday since pricing.

However, the notes were moving in line dollar-neutral.

The 6.75% convertible notes gained 1 point outright. They were marked at 104 bid, 104.5 offered in the late afternoon.

There was $5 million in reported volume.

Starwood’s stock traded to a low of $20.29 and a high of $20.54 before closing at $20.42, up 0.62%.

The 6.75% convertible notes saw a rough start in secondary market activity with the notes falling below par outright and contracting dollar-neutral.

However, the notes have been gaining on an outright basis with stock up more than 6% over the past five trading sessions.

The notes move on a light delta of 40% with Starwood a low vol. name, a source said.

Mentioned in this article:

Coinbase Global, Inc. Nasdaq: COIN

RealReal Inc. Nasdaq: REAL

Starwood Property Trust Inc. NYSE: STWD

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