NQ Mobile rises on parity basis as shares slide again; Qihoo, Ctrip.com down on hedge

By Rebecca Melvin

New York, Oct. 28 - NQ Mobile Inc.'s 4% convertibles, which debuted in the convertibles market less than three weeks ago, were quoted at 40 bid, 50 offered early Monday, with a higher, tighter market of 52 bid, 57 offered reported at the end of the session.

The NQ Mobile convertibles traded up on an absolute basis and improved on a parity basis as the underlying shares weakened further on the heels of fraud allegations against the China-based mobile security company by research firm Muddy Waters.

NQ Mobile shares dropped another 17% to $8.80 on Monday, compared to $23.00 before the research surfaced on Thursday.

The NQ meltdown has put pressure on other China names in convertibles, and those bonds continued to contract on a dollar-neutral, or hedged, basis on Monday. Qihoo 360 Technology Co. Ltd., which priced $600 million of 2.5% convertibles at the end of the summer, saw that paper at the end of Monday at 105 bid, 107 offered, according to a New York-based bank. That was with shares around $82.00.

Earlier in the session, the Qihoo convertibles were quoted higher at 109.25 bid, 109.875 offered with shares of the China PC and mobile internet security products provider at $84.74.

A trader said that the bonds lost another 1.75 points on swap on Monday for a combined swap loss since last Wednesday of 5 points, according to a Connecticut-based trader.

Ctrip.com International Ltd., which priced $180 million of 0.5% convertibles in the middle of September, was seen at 103 bid, 105 offered at the close Monday, with the underlying shares of the Shanghai-based travel service provider up 0.04% on Monday at $55.74. Still, the shares were lower since the middle of last Thursday by 5%.

On their debut Sept. 19, the Ctrip.com convertibles jumped to 109.25 to 109.825 with the underlying shares at $50.56.

Elsewhere, Dendreon Corp.'s convertibles jumped 7 or 8 points on an outright basis after news reports that the Seattle-based biotechnology company is looking to sell itself. Dendreon shares shot up 11% to $2.81.

Aegean Marine Petroleum Network Inc., which priced $75 million of 4% five-year convertible senior notes 10 days ago, was seen down 3 points at 99.875, according to Trace data, amid no particular news.

Aegean is an Athens, Greece-based marine fuel logistics company.

NQ Mobile up on parity basis

NQ Mobile's 4% convertibles due 2018 were quoted at 40 bid, 50 offered on Monday, and a market at 52 bid, 57 offered versus an underlying share price of $8.80 was also reported. On Friday the bonds were 30 bid, 50 offered.

It was unlikely that the paper traded a lot on Monday, if at all, one trader said, and specific numbers were not forthcoming. But sources agreed that the bonds rose on a parity basis.

Shares of the Dallas- and Beijing-based mobile internet services provider slid another $1.83, or 17.2%, to $8.80, after dropping 12% to $10.63 on Friday after trading resumed from being halted and after dropping more than 50% on Thursday.

"I think the bonds are going to shake out at 5 to 10 points above parity," a Connecticut-based trader said.

A second Connecticut trader said the bonds closed at 17.625 points above parity bid on Monday, compared to a trade just above parity on Friday.

On an absolute basis the bonds were up 11 points from Friday when they were 30 bid, the second trader said.

A third trader said the convertibles' "bid side had been 3 points to 5 points over the stock," a New York-based trader said.

The Muddy Waters report alleges that at least 72% of NQ's 2012 China security revenue was fictitious.

For its part, NQ said on Friday that the accusations were false.

The slide for NQ shares on Monday was said to be spurred by speculation that ZTE Corp., a China-based telecommunications equipment and services company, has ended a contract with the company.

The NQ convertible notes are non-callable until Oct. 20, 2016 and then are provisionally callable if shares rise to 130% of the conversion price.

There is an investor put on Oct. 15, 2016. Settlement will be for shares only.

Qihoo, Ctrip under pressure

Qihoo's 2.5% convertibles due 2018 closed at 106.62 bid, 107.62 offered versus an underlying share price of $81.90, according to a Connecticut-based trader.

That was down another 1.75 points on swap Monday and down 5 points on swap since Wednesday.

Qihoo shares ended down 3.4%, and shares are down 6.5% since last Wednesday.

After the Qihoo convertible deal priced at the end of August, it was seen at 105 bid, 106 offered with the shares at $77.80.

Ctrip.com's 0.5% convertibles due 2018 were seen at 103.51 bid, 104.14 offered versus an underlying share price of $55.74 at the end of the session.

Ctrip.com shares see-sawed but ended essentially unchanged, or up 2 cents.

Dendreon jumps on chatter

Dendreon's 2.875% convertibles due 2016 traded up 7 or 8 points on Monday to about 62, a Connecticut-based trader said.

Dendreon shares added 28 cents, or 11%, to $2.81.

Dendron's stock and convertibles jumped out of the gate Monday following news reports that the company is looking to sell itself.

Whether the trend will continue or not and whether the distressed bonds can recover was looked at as possible, but unlikely: "I don't know who is going to want to buy this company and pay off the bonds," a Connecticut-based trader said.

The company has been struggling with lower-than-expected sales of its Provenge drug. In August, the company said that based on enrollments in July and early August, its Provenge drug won't be able to generate enough sales in the second half of 2013 to overcome the first six months, so it won't meet full-year targets.

Mentioned in this article:

Aegean Marine Petroleum Network Inc. NYSE: ANW

Ctrip.com International Ltd. Nasdaq: CTRP

Dendreon Corp. Nasdaq: DNDN

NQ Mobile Inc. NYSE: NQ

Qihoo 360 Technology Co. Ltd. Nasdaq: QIHU

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.