Opendoor flat, Upstart Holdings convertibles skyrocket on debut; Vroom down again

By Abigail W. Adams

Portland, Me., Aug. 18 – New paper was in focus in the convertibles market on Wednesday as $1.425 billion in new supply flooded the secondary space.

Opendoor Technologies Inc. priced an upsized $850 million offering of five-year convertible notes and Upstart Holdings Inc. priced $575 million of five-year convertible notes after the market close on Tuesday.

The new paper had mixed performances on debut with Upstart Holdings skyrocketing on an outright and dollar-neutral basis and Opendoor falling flat.

The new paper hit the secondary space on another choppy day for equities with benchmarks wavering between gains and losses before a late day sell-off pushed them firmly into the red.

The Dow Jones industrial average closed the day down 382 points, or 1.08%, the S&P 500 index closed the day down 1.07%, the Nasdaq Composite finished down 0.89% and the Russell 2000 index ended down 0.84%.

Vroom Inc.’s 0.75% convertible notes due 2026 continued to struggle with the notes again hitting a new low during Wednesday’s session.

Cree Inc.’s 0.875% convertible notes due 2023 were down outright but expanding dollar-neutral as stock sold off following earnings.

Opendoor flat

Opendoor Technologies priced an upsized $850 million offering of five-year convertible notes after the market close on Tuesday at par with a coupon of 0.25% and an initial conversion premium of 30%.

Pricing came at the midpoint of talk for a coupon of 0% to 0.5% and at the cheap end of talk for an initial conversion premium of 30% to 35%, according to a market source.

The new paper fell flat in the aftermarket.

The notes traded as low as 98 soon after the opening bell with stock off. However, the notes returned to par as stock recovered.

They remained wrapped around par heading into the late afternoon.

While the notes contracted early in the session, they were trading flat dollar-neutral.

“Nothing exciting there,” a source said.

While the notes saw little movement in price, they were active with more than $100 million in reported volume in the late afternoon.

Opendoor’s stock traded to a high of $14.81 and a low of $14.42 before closing the day at $14.47, a decrease of 2.2%.

Upstart skyrockets

Upstart Holdings priced $575 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 0.25% and an initial conversion premium of 42.5%.

Pricing came at the midpoint of talk for a coupon of 0% to 0.5% and at the cheap end of talk for an initial conversion premium of 42.5% to 47.5%, according to a market source.

The new paper skyrocketed on an outright and dollar-neutral basis on debut.

The notes jumped to 106 early in the session. They continued to trade on a 106-handle in the late afternoon.

They were seen expanded 3.75 points to 4 points dollar-neutral, sources said.

There was $65 million in reported volume in the late afternoon.

Upstart Holdings’ stock traded to a high of $220.11 and a low of $203.60 before closing the day at $212.27, an increase of 6.04%.

Upstart only recently went public.

The artificial intelligence consumer lending platform priced its initial public offering in December 2020 at $20 per share, a source said.

The company did a follow-on offering in April at $120.

Stock continued to skyrocketed after the company released earnings on Aug. 10 and gained about 50% in a single week.

Vroom’s new low

Vroom’s 0.75% convertible notes due 2026 continued to struggle on Wednesday with the notes again hitting a new low.

The 0.75% notes traded down another point outright with stock off more than 5%.

The notes were changing hands at 82.75 in the late afternoon.

There was $13 million in reported volume.

Vroom’s stock again set a new 52-week low during Wednesday’s session.

Stock traded to a high of $27.07 and a low of $25.65 before closing the day at $25.70, a decrease of 5.83%.

Vroom priced a $625 million issue of the 0.75% notes at par in June.

While the notes initially performed well, they have been on a downward spiral since the company reported earnings on Aug. 11.

Stock has been nearly slashed in half since the company reported disappointing numbers.

The 0.75% notes are now in busted territory, a source said.

Cree’s earnings

Cree’s 0.875% convertible notes due 2023 were active following the company’s earnings report.

While the notes dropped on an outright basis as stock took a hit, they expanded on the way down.

The 0.875% notes dropped more than 10 points outright.

They were changing hands at 136.5 versus a stock price of $78.28.

The notes expanded about 1 point on a dollar-neutral basis, a source said.

Cree’s stock traded to a high of $81 and a low of $75.06 before closing the day at $78.36, a decrease of 9.15%.

The company announced fourth-quarter losses per share of 23 cents versus analyst expectations for a loss of 25 cents.

Revenue was $145.8 million versus analyst expectations for revenue of $145.4 million.

While earnings were largely in line with expectations, guidance was weak with the company expecting first-quarter revenue of $144 million to $154 million versus analyst expectations for revenue of $155.7 million.

Mentioned in this article:

Cree Inc. Nasdaq: CREE

Opendoor Technologies Inc. Nasdaq: OPEN

Upstart Holdings Inc. Nasdaq: UPST

Vroom Inc. Nasdaq: VRM

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