Illumina end-of-life convertible bond trades dominate the tape; Affirm, Opendoor active

By Abigail W. Adams

Portland, Me., Dec. 22 – While equities remained volatile with indexes deep in the red on Thursday, activity in the convertibles secondary space continued to dwindle as the market enters into the final days of 2022.

The Dow Jones industrial average closed Thursday down 349 points, or 1.05%, the S&P 500 index closed down 1.45%, the Nasdaq Composite index closed down 2.18% and the Russell 2000 index closed down 1.39%.

Stocks gave back nearly all gains from Wednesday’s consumer confidence report rally.

The market was no longer expressing confidence as it awaits Friday’s release of the Personal Consumption Expenditures report, the Federal Reserve’s preferred inflation gauge.

While equities continued to see wild swings, the accounts still active in the secondary space were focused on end-of-year clean-up, a source said.

There was $50 million in reported convertibles trading volume about one hour into the session and $262 million in the space about one hour before the market close.

Illumina Inc.’s soon-to-mature 0% convertible notes due Aug. 18, 2023 (BBB) were the top traded issue of Thursday’s session.

Affirm Holdings Inc.’s 0% convertible notes due 2026 and Opendoor Technologies Inc.’s 0.25% convertible notes due 2026 were also active with little movement in price.

End of life

Illumina’s soon-to-mature 0% convertible notes due Aug. 18, 2023 were the top traded issue of Thursday’s session although with little movement in price.

The notes continued to trade with an attractive yield and were switching hands as their end of life approaches.

The notes were changing hands at 96.75 in the late afternoon with the yield 5.28%.

There was $10 million in reported volume.

The notes have long traded for their yield and have no call optionality with the notes to be redeemed at par upon maturity, a source said.

However, Illumina’s stock closed Thursday at $195.78, a decrease of 0.85%.

The yield

Several of the high-flyers from 2020 and 2021 were on the tape on Thursday as accounts cleaned up their portfolios.

Affirm’s 0% convertible notes due 2026 were active early in the session although activity diminished as the session progressed.

The notes continued to trade around 55.5 with the yield about 15.75%, according to a market source.

There was $5 million in reported volume.

The notes are not equity sensitive with a conversion premium of over 230%.

However, Affirm’s stock traded to a low of $8.62 and a high of $9.36 before closing the day at $9.15, a decrease of 3.79%.

Opendoor Technologies’ 0.25% convertible notes due 2026 were also active although with little movement in price.

The 0.25% convertible notes remained wrapped around 40 with the yield about 27.375%, according to a market source.

While not equity sensitive, the notes do trade on hedge with a delta of about 40%.

Opendoor’s stock traded to a high of $1.17 and a low of $1.01 before closing the day at $1.03, a decrease of 9.65%.

Mentioned in this article:

Affirm Holdings Inc. Nasdaq: AFRM

Illumina Inc. Nasdaq: ILMN

Opendoor Technologies Inc. Nasdaq: OPEN

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