China-based companies under pressure; Pinduoduo convertibles sink; NextEra tops par

By Abigail W. Adams

Portland, Me., July 7 – There was an uptick of activity in the convertibles secondary space on Wednesday on a volatile day for equities.

Equity benchmarks wavered between gains and losses throughout the session but most were able to squeak out gains by the close.

The Dow Jones industrial average closed the day up 104 points or 0.3%, the S&P 500 index closed the day up 0.34%, and the Nasdaq Composite closed the day up 0.01%.

However, the Russell 2000 index closed the day down 0.89%.

The convertibles secondary space saw an uptick of volume with $115 million on the tape about one hour into the session and $432 million in reported volume about one hour before the market close.

The convertible notes of China-based companies remained under pressure.

Pinduoduo Inc.’s 0% convertible notes due 2025 were in focus with the notes sinking further below par as the sell-off in the company’s American Depositary Shares intensified.

JOYY Inc.’s 1.375% convertible notes due 2026 and iQIYI Inc.’s 4% convertible notes due 2026 contracted as their equity also sold off.

While China-based convertible notes were taking a hit, NextEra Energy Partners LP’s beleaguered 0% convertible notes due 2024 were on the rise with the notes topping par for the first time since pricing in mid-June.

Under pressure

The convertible notes of China-based companies remained under pressure on Wednesday amid the intensification of China’s crackdown on its tech behemoths.

There were few buyers in the market for the paper, and those that were buying were bidding low, a source said.

Pinduoduo’s 0% convertible notes due 2025 were the top traded name in the convertibles secondary space with the notes sinking further below par in the high-volume activity.

The 0% notes were down another 1 point outright with the Shanghai-based e-commerce company’s ADSs down another 2%.

They were changing hands at 98 versus an ADS price of $109.46 in the late afternoon. There was more than $21 million in reported volume.

Pinduoduo’s equity traded to a high of $114.12 and a low of $109.02 before closing the day at $110.26, a decrease of 2.48%.

The notes were down about 3 points outright on Tuesday.

While volume in the name was light, iQIYI’s 4% convertible notes due 2026 also continued to trade off.

The notes dropped about 1 point outright to 95.5 in the late afternoon.

They contracted 0.25 to 0.5 point dollar-neutral, a source said.

The Beijing-based media streaming service provider’s ADSs traded to a high of $14.59 and a low of $13.39 before closing the day at $13.49, a decrease of 6.32%.

JOYY’s 1.375% convertible notes dropped about 6 points outright.

The notes were changing hands just north of 96 in the late afternoon.

They contracted about 0.25 point dollar-neutral, a source said.

The Guangzhou, China-based social media platform’s ADSs traded to a high of $63.01 and a low of $59.75 before closing the day at $60.57, a decrease of 2.05%.

NextEra tops par

NextEra’s 0% convertible notes due 2024 topped par on Wednesday for the first time since pricing.

The 0% convertible notes were up about 1 point outright to change hands between 100.375 and 100.5 early in the session.

They continued to trade at 100.5 in the late afternoon.

There was about $7 million in reported volume.

NextEra’s stock was volatile alongside broader markets.

The shares traded as high as $78.24 and as low as $76.45 before closing the day at $77.18, a decrease of 0.58%.

The 0% convertible notes have struggled since pricing and were trading on a 98-handle the last week of June.

However, the notes have posted steady gains in July.

NextEra priced a $500 million issue of the 0% convertible notes at par on June 15.

Mentioned in this article:

iQIYI Inc. Nasdaq: IQ

JOYY Inc. Nasdaq: YY

NextEra Energy Partners LP NYSE: NEP

Pinduoduo Inc. Nasdaq: PDD

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