Convertibles market contraction expected; secondary pain continues; DISH down again

By Abigail W. Adams

Portland, Me., May 9 – The pain continued for risk assets on Monday as equity markets continued to plummet and credit spreads widen in the wake of last week’s announcement from the Federal Reserve.

The Dow Jones industrial average closed Monday down 654 points, or 1.99%, the S&P 500 index was down 3.20%, the Nasdaq Composite index was down 4.29% and the Russell 2000 index was down 4.21%.

“This is what happens when the Fed takes the punch bowl away,” a source said.

The number of convertibles issuers that have seen double digit declines in their stocks over the past few sessions is “staggering,” a source said.

The convertibles primary market has been quiet amid the carnage and is expected to remain so until markets stabilize.

New deal volume year to date is the lightest it has been since 2016 with only one $200 million deal pricing since April 7.

Global convertible annual issuance projections have been downwardly revised to $75 billion to $85 billion, a decrease of 25% from previous projections, according to a BofA Global Research report.

The global market is poised for its largest annual contraction since 2011 when the market shrunk by $56.1 billion.

The U.S. market has seen $11.6 billion in redemptions year to date, according to the report, versus $6.255 billion in new issuance.

Meanwhile, selling pressure continued to mount in the secondary with convertibles holders beginning to “puke” their positions, a source said.

There was heavy inventory for sale from dealers during Monday’s session.

There was $60 million in reported volume a little more than one hour into the session and $435 million on the tape about one hour before the market close.

DISH Network Corp.’s convertible notes continued to contract in heavy volume following earnings the previous week.

RingCentral Inc.’s 0% convertible notes due 2025 were weaker in active trading with earnings expected after the close.

Coinbase Global Inc.’s 0.5% convertible notes due 2026 continued to hit new lows as Bitcoin cratered on Monday on the flight from risk.

DISH heads lower

DISH’s convertible notes continued to get pummeled on Monday after leading losses during Friday’s session.

The 0% convertible notes due 2025 were the most actively traded issue in the secondary space.

The notes were down another 2.5 points outright with stock off about 5%.

The 0% notes were changing hands at 77 versus a stock price of $21.63 in the late afternoon.

The notes contracted another 1.5 points dollar-neutral, a source said.

DISH’s 3.375% convertible notes due 2026 were down another 1 point outright.

They were trading at 79.625 versus a stock price of $22.39 early in the session and fell to 78.5 in the late afternoon.

The convertibles were contracted another 1 point dollar-neutral, a source said.

DISH’s stock traded to a high of $22.71 and a low of $20.95 before closing the day at $21.30, a decrease of 4.14%.

DISH’s convertible notes have been under pressure since Friday after the satellite broadcaster announced a large earnings miss and a loss of subscribers.

RingCentral active

RingCentral’s 0% convertible notes due 2025 were down in active trading on Monday as stock hit a new 52-week low heading into the cloud-based communication company’s earnings report, which was released after the market close.

The 0% convertible notes were down 2 points outright with stock off 9%.

The notes were changing hands at 79.625 versus a stock price of $70.48 in the late afternoon.

There was $15 million in reported volume.

RingCentral’s stock traded to a new 52-week low of $68.38 and a high of $74.96 before closing the day at $68.66, a decrease of 10.14%.

Coinbase hits new low

Coinbase’s 0.5% convertible notes due 2026 continued to hit new lows alongside stock as Bitcoin plunged during Monday’s session.

The 0.5% convertible notes were down 4.5 points outright with stock off more than 19%.

The convertible notes were changing hands at 70.625 versus a stock price of $84.35 in the late afternoon.

The notes were yielding 9.355%.

There was $10 million in reported volume.

Coinbase’s stock traded to a high of $96.43 and a 52-week low of $81.78 before closing the day at $83.51, a decrease of 19.50%.

Coinbase’s stock plummeted on the eve of its earnings report, which is slated to be released on Tuesday, and amid the cratering price of Bitcoin.

Bitcoin traded down to $31,433.81, a decrease of 9.07%, shortly after the close of U.S. equity markets.

Bitcoin was beginning to get hit by the flight from risk as rising rates and rising U.S. dollar values sparked selling across the crypto space.

Mentioned in this article:

Coinbase Global Inc. Nasdaq: COIN

DISH Network Corp. Nasdaq: DISH

RingCentral Inc. NYSE: RNG

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