Illumina convertibles active; Nio softens; HubSpot, DraftKings gain post-earnings

By Abigail W. Adams

Portland, Me., Feb. 17 – The convertibles secondary space saw a quiet session on Friday with no new paper entering the market over the course of the week and equities volatile after a full slate of economic data continued to cast doubt over the Federal Reserve’s rate hike campaign.

The bulls and bears continued to struggle in equity markets on Friday with indexes again opening deep in the red but paring losses to close mixed with small cap and value stocks outperforming.

The Dow Jones industrial average closed Friday up 130 points, or 0.39%, the S&P 500 index closed down 0.28%, the Nasdaq Composite index closed down 0.58% and the Russell 2000 index closed up 0.14%.

There was $61 million in reported convertibles trading volume about one hour into the session and $300 million on the tape about one hour before the close.

While trading activity was muted, topical and earnings-related news sparked heavy volume in outstanding issues.

Illumina Inc.’s soon-to-mature 0% convertible notes due Aug. 18, 2023 (BBB) were among the top traded issues in the space with short-duration notes sought after.

Nio Inc.’s 0.5% convertible bond due 2027 was also a top trader on Friday after more than one week with no round lot trades.

The announcement of its earnings date and a host of China and EV-related news may have sparked activity in the issue, a source said.

HubSpot Inc.’s deep-in-the-money 0.375% convertible notes due 2025 made large outright gains as stock soared post-earnings.

DraftKings Inc.’s 0% convertible notes due 2028 resumed their upward momentum in active trade after a surprise earnings beat.

Illumina in demand

Illumina’s soon-to-mature 0% convertible notes due Aug. 18, 2023 (BBB) dominated activity in the secondary space with short-duration notes remaining sought after.

The 0% notes were little changed at 97.625 with the yield about 5.125%, a source said.

They continued to see large trades in the 97.5 to 97.625 range as the session progressed.

There was $18 million in reported volume.

The notes have long lost their optionality and trade for their yield.

However, with the one-year Treasury yield crossing above 5% this week, the yield the notes were offering was less attractive, a source said.

Nio in focus

Nio’s 0.5% convertible notes due 2027 were slightly softer in heavy volume on Friday after more than one week of no trading activity.

The 0.5% notes were wrapped around 82 early in the session and fell to 81.75 by the late afternoon, sources said.

The yield for the notes, which are putable on Feb. 1, 2025, rose to about 11.25%.

There was $14 million in reported volume.

While the high-premium notes are not equity sensitive, Nio’s American Depositary Shares were soft in intraday activity but cut losses to close the day unchanged.

The ADSs traded to a low of $9.93 and a high of $10.24 before closing flat at $10.19.

The 0.5% notes last traded on Feb. 10 with the notes in the 82.5 to 83 context, a source said.

Nio announced the previous session that it would release earnings on March 1.

The slate of China headlines, from spy balloons to missing tycoons, and Tesla’s vehicle recall may also have sparked activity in the Shanghai-based EV manufacturer, a source said.

HubSpot’s earnings

HubSpot’s deep-in-the-money 0.375% convertible notes due 2025 jumped outright alongside stock after earnings.

The 0.375% notes were up 9 points outright with stock up more than 10%.

The notes were changing hands at 151.125 versus a stock price $397.70 in the late afternoon.

There was $12 million in reported volume.

HubSpot’s stock traded to a low of $394.45 and a high of $418.39 before closing at $404.65, up 11.80%.

Stock soared after the software company announced a large earnings beat after the market close on Thursday.

HubSpot reported earnings per share of $1.11 versus the 82 cents expected on revenue of $469.66 million versus the $446.01 million expected.

DraftKings’ earnings

DraftKings’ 0% convertible notes due 2028 resumed their upward momentum on Friday after a surprise earnings beat.

The 0% notes climbed as much as 2 points outright early in the session with the notes hitting 71.875 shortly after the opening bell.

While they gave back some gains, the notes were still poised to close the day up about 1 point.

The notes were changing hands at 70.5 versus a stock price of $20.47 in the late afternoon, according to a market source.

The yield was about 7%.

There was $9 million in reported volume.

DraftKings’ stock traded to a low of $19.28 and a high of $21.20 before closing at $20.54, a 15.33% gain.

Stock jumped after a surprise earnings beat and upbeat guidance.

The gaming company reported losses per share of 53 cents versus the 59 cents expected on revenue of $855 million versus the $798.64 million expected.

The company also revised its forward guidance to the upside with the company now expecting negative EBITDA of $350 million to $450 million in 2023 versus previous guidance for negative EBITDA of $475 million to $575 million.

Mentioned in this article:

DraftKings Inc. Nasdaq: DKNG

HubSpot Inc. NYSE: HUBS

Illumina Inc. Nasdaq: ILMN

Nio Inc. NYSE: NIO

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