DraftKings convertibles in focus, gain outright; Opendoor convertible notes improve

By Abigail W. Adams

Portland, Me., Aug. 25 – After a slow start, the convertibles secondary space saw an uptick of activity in the afternoon as the S&P 500 index and Nasdaq Composite again broached fresh heights.

The Dow Jones industrial average closed the day up 38 points, or 0.11%, the S&P 500 closed the day up 0.22%, the Nasdaq Composite closed the day up 0.15% and the Russell 2000 finished up 0.54%.

While the secondary market was active, there continued to be a wide range to the names on the tape as market players reposition themselves following earnings.

“There’s a lot of moving paper around,” a source said.

DraftKings Inc.’s 0% convertible notes due 2028 were in focus with the notes posting gains on an outright basis on a strong day for the company’s stock. However, the notes were flat on a dollar-neutral, or hedged, basis.

Opendoor Technologies Inc.’s 0.25% convertible notes due 2026 were also active with the notes continuing to improve on an outright and dollar-neutral basis.

In a carry-over from Tuesday’s session, Palo Alto Networks Inc.’s convertible notes remained active although the notes were moving in line dollar-neutral.

DraftKings eyed

DraftKings’ 0% convertible notes due 2028 were in focus on Monday with the notes posting gains on an outright basis as stock surged.

The 0% notes were up about 2.5 points outright with stock up more than 5%.

The convertibles were marked at 95.375 bid, 96.125 offered in the late afternoon.

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

DraftKings’ stock traded to a high of $60.37 and a low of $56.50 before closing the day at $60.11, an increase of 6.45%.

Stock was on the rise after the gaming company announced a multi-year partnership with gaming technology company Simplebet.

The agreement will enable real-money micro-betting on live sports through the DraftKings platform.

Stock was also boosted by news that three ETFs run by famed stock picker Cathie Wood purchased about $60 million of DraftKings’ stock on Tuesday.

While DraftKings’ stock was on the rise on Wednesday, it did little to change the dollar-neutral performance of the notes, which still have a high premium, a source said.

The conversion price on the notes is $94.85.

Opendoor gains

Opendoor’s 0.25% convertible notes due 2026 were among the most actively traded in the secondary space on Wednesday with the notes continuing their upward momentum.

The 0.25% notes were changing hands at 109.25 versus an equity price of $16.97 early in the session.

They continued to trade on a 109-handle in the afternoon.

The notes improved about 0.75 point dollar-neutral, a source said.

Opendoor’s stock traded to a low of $16.71 and a high of $17.34 before closing the day at $17.28, an increase of 0.058%.

Opendoor’s convertible notes were initially volatile in the aftermarket and traded as low as a 96-handle.

While the notes spent their first days in the aftermarket trading below or at par, they improved dramatically on an outright basis over the past few sessions.

The notes jumped to 106 on Monday and have steadily climbed alongside stock since.

“Those who stuck with it have been rewarded,” a source said.

Opendoor priced the 0.25% convertible notes at par on Aug. 17 with the greenshoe recently exercised in full, lifting the size of the deal to $977.5 million.

Palo Alto active

Palo Alto’s convertible notes remained active with the notes continuing to rise on an outright basis following the cyber-security company’s blow-out earnings report.

Palo Alto’s 0.75% convertible notes due 2023 gained another 2 points outright to close the day just shy of 170.

The 0.375% convertible notes due 2025 were also up about 2 points outright to 156.75.

However, the notes were moving largely in line dollar-neutral, a source said.

Palo Alto’s stock traded to a low of $435.50 and a high of $449.78 before closing the day at $447.05, an increase of 1.17%.

The notes were in focus on Tuesday and gained both outright and dollar-neutral as stock surged more than 20% following earnings.

Mentioned in this article:

DraftKings Inc. Nasdaq: DKNG

Palo Alto Networks Inc. NYSE: PANW

Opendoor Technologies Inc. Nasdaq: OPEN

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