Convertibles secondary bid up; Expedia, Southwest Airlines eyed; Bilibili, Luminar gain

By Abigail W. Adams

Portland, Me., Dec. 21 – There was an uptick of activity in the convertibles secondary space on Tuesday as the market firmed with equities on the rebound.

The Dow Jones industrial average closed Tuesday up 560 points, or 1.6%, the S&P 500 index closed up 1.78%, the Nasdaq Composite closed up 2.4% and the Russell 2000 index closed up 2.92%.

There was $87 million in reported volume about one hour into the session and $500 million in reported volume about one hour before the market close.

“Things are bid up again,” a source said.

Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) and Expedia Inc.’s 0% convertible notes due 2026 (Baa3/BBB-/BBB-) were in focus and gaining alongside stock.

China-based convertible notes were also improved.

Bilibili Inc.’s 0.5% convertible notes due 2026 rose on an outright and dollar-neutral basis as equity improved after hitting a new 52-week low during the previous session.

Luminar Technologies Inc.’s recently priced 1.25% convertible notes due 2026 were also on the rise in active trading with the notes wrapped around 102.

Travel names in focus

Southwest Airlines 1.25% convertibles due 2025 and Expedia’s 0% convertible notes due 2026 were in focus on Tuesday as travel names rebounded.

Southwest’s 1.25% convertible notes were up 4 points outright with stock up almost 4%.

The notes were changing hands just shy of 130 versus an equity price of $40.96 early in the session.

They continued to trade around 130 as the session progressed.

There was $16 million in reported volume on the tape.

Southwest’s stock traded to a low of $39.64 and a high of $41.41 before closing the day at $40.87, an increase of 3.88%.

Expedia’s 0% convertible notes due 2026 (Baa3/BBB-/BBB-) rose 3 points outright with stock up more than 9%.

The 0% convertible notes were changing hands at 112.75 versus a stock price of $167.47 early in the session.

They traded up to 114.375 versus a stock price of $174.83 in the late afternoon.

There was more than $25 million in reported volume in the late afternoon.

Expedia’s stock traded to a high of $178.62 and a low of $164.08 before closing the day at $177.27, an increase of 9.14%.

While so-called “reopening trade” names have taken a hit due to the emergence of the Omicron Covid-19 variant, travel demand is expected to remain strong through the holiday season.

Bilibili gains

The convertible notes of China-based companies were on the rise on Tuesday with buyers returning to the space.

“There’s a good bid to the China names,” a source said. “People are coming back in.”

Bilibili’s 0.5% convertible notes due 2026 were posting gains on an outright and dollar-neutral basis.

The notes rose about 2 points outright with equity up more than 11%.

They were changing hands at 86.5 versus an equity price of $49.35 in the late afternoon.

They expanded about 0.5 point dollar-neutral, a source said.

There was $10 million in reported volume.

The Shanghai-based video sharing website’s American Depositary Shares traded to a low of $46.50 and a high of $49.48 before closing the day at $49.31, an increase of 11.71%.

Bilibili‘s ADSs hit a new 52-week low of $43.21 on Monday.

Luminar improves

Luminar’s 1.25% convertible notes due 2026 continued to gain on Tuesday with the notes trading up to 102 after a disastrous start in the secondary space.

The 1.25% convertible notes rose 0.5 point outright with stock up 2%.

They were changing hands at 102.125 versus a stock price of $15.87 in the late afternoon.

There was $9 million in reported volume.

Luminar’s stock traded to a low of $15.65 and a high of $16.14 before closing the day at $16.05, an increase of 2.16%.

The convertible notes have improved over the past two sessions after a disastrous start in the secondary space that saw the notes, which priced at par, trade as low as 95.

Luminar priced a $550 million issue of the 1.25% notes on Dec. 14. The greenshoe was recently partially exercised, lifting the total size of the deal to $600 million.

Mentioned in this article:

Bilibili Inc. Nasdaq: BILI

Expedia Inc. Nasdaq: EXPE

Luminar Technologies Inc. Nasdaq: LAZR

Southwest Airlines Co. NYSE: LUV

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