Convertibles well bid; Uber, Airbnb, Bill.com notes active; Novavax underperforms

By Abigail W. Adams

Portland, Me., Jan. 4 – The convertibles secondary space remained quiet yet well bid on Wednesday as equity volatility continued.

Equity indexes continued to gyrate between gains and losses as the market digested the latest JOLTS report and the Federal Open Market Committee’s December meeting minute notes.

While the JOLTS report pushed some indexes into the red early in the session, they recovered and were strong prior to the 2 p.m. ET release of the Fed minute notes.

However, indexes were again dragged lower amid continued hawkish sentiment from the Federal Reserve and wavered between gains and losses until a surge of last-minute buying lifted indexes into positive territory at the close.

The Dow Jones industrial average closed Wednesday up 133 points, or 0.40%, the S&P 500 index closed up 0.75%, the Nasdaq Composite index closed up 0.69% and the Russell 2000 index closed up 1.26%.

While equities were volatile, the secondary space remained well bid with on-the-run names expanding 0.25 point to 0.5 point, a source said.

The strength of the bond market and beginning of the year buying activity helped lift the broader market.

While 2022 was a brutal year for convertibles, market players are optimistic about 2023.

“From a buyside perspective, it looks as though it will be difficult to lose money simply because durations are short, most bonds are trading at discounts and yields are up,” a source said.

However, trading activity remained subdued on Wednesday with $60 million on the tape a little more than one hour into the session and $428 million on the tape about one hour before the market close.

Uber Technologies Inc.’s 0% convertible notes due 2025 and Bill.com Holdings Inc.’s 0% convertible notes due 2025 were active on Wednesday although with little movement in price.

Airbnb Inc.’s 0% convertible notes due 2026 continued to improve in heavy volume.

While volume in the name was light, Novavax Inc.’s 5% convertible notes due 2027 continued to underperform on hedge with the notes contracting as stock climbed double digits.

Active issues

Uber’s 0% convertible notes due 2025 and Bill.com’s 0% convertible notes due 2025 saw an active day on Wednesday although with little movement in price.

Uber’s 0% convertible notes were the top traded issue of the session.

The notes were changing hands at 85.375 versus a stock price of $25.87 in the late afternoon.

The yield on the notes was just shy of 5.5%.

There was $15 million in reported volume.

Uber’s stock traded to a high of $25.97 and a low of $25.32 before closing the day at $25.91, an increase of 2.17%.

While it did little to move the stock, Uber recently received a buy recommendation from a New Street Research analyst, who set the stock price target at $50, Barron’s reported.

Bill.com’s 0% convertible notes due 2025 also saw heavy volume although with little movement in price.

The 0% convertible notes were seen at 103 versus a stock price of $110.41 early in the session, according to a market source.

They remained wrapped around 103 in the late afternoon.

There was about $10 million in reported volume.

Bill.com’s stock traded to a high of $112.12 and a low of $106.98 before closing the day at $107.24, a decrease of 1.8%.

Airbnb in focus

Airbnb’s 0% convertible notes due 2026 continued to improve in heavy volume on Wednesday.

The notes rose another 0.5 point outright with stock up about 4%.

They were trading at 83.625 versus a stock price of $87.99 in the late afternoon, according to a market source.

The yield was 5.625%.

Airbnb’s stock traded to a low of $84.79 and a high of $88.84 before closing the day at $88.72, an increase of 4.5%.

Airbnb’s 0% convertible notes have been on a steady uptrend in active trading in the final days of 2022 and into the New Year.

The issue was one of Barclays top recommendations for a 2023 portfolio, according to the Barclays report Bridge Over Troubled Water.

Novavax underperforms

While volume in the name was light, Novavax’s 5% convertible notes due 2027 continued to underperform on hedge.

The 5% notes were seen at 101.75 versus a stock price of $10.61 in the late afternoon, according to a market source.

However, the notes priced at par versus a stock price of $10.

Given the more than 6% move in stock since pricing, the notes should be trading at a much higher dollar price, a source said.

“They continue to crunch,” a source said.

Novavax’s stock traded to a low of $9.88 and a high of $11.47 before closing the day at $11.33, an increase of 15.73%.

Mentioned in this article:

Airbnb Inc. Nasdaq: ABNB

Bill.com Holdings Inc. NYSE: BILL

Novavax Inc. Nasdaq: NVAX

Uber Technologies Inc. NYSE: UBER

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