Luckin Coffee sinks below par; China-based convertibles soft; Booking Holdings expands

By Abigail W. Adams

Portland, Me., Jan. 27 – The convertibles secondary space was quiet on Monday with the markets heavy as the spreading coronavirus weighed down equities.

After the heavy trading volume seen in recent weeks, volume was light in the secondary space.

There was $79 million in reported volume about one hour into Monday’s session and $286 million in reported volume in the late afternoon.

In a remarkable reversal of fortunes, Luckin Coffee Inc.’s 0.75% convertible notes due 2025 dropped below par and saw a large dollar-neutral contraction as the Beijing-based coffee shop chain’s ADS sold off.

The convertibles of several China-based companies were weak with their underlying equities down as the death toll from the pneumonia-like illness rises and confirmed cases spread to western countries.

Pinduoduo Inc.’s 0% convertible notes due 2024 and YY Inc.’s 0.75% convertible notes due 2025 were both coming in as their underlying equity dropped.

Booking Holdings Inc.’s convertible notes were again major volume movers in the secondary space with the notes down outright but expanding dollar-neutral with stock off more than 4% in intraday trading.

Luckin contracts

Luckin Coffee’s 0.75% convertible notes due 2025 dropped below par and saw a large dollar-neutral contraction on Monday – a dramatic reversal of fortune for notes whose upward momentum previously seemed unstoppable.

The 0.75% convertible notes traded as low as 94.75 early in Monday’s session but rebounded as equity bounced off its lows.

The notes were changing hands at 97.625 in the late afternoon.

They were contracted 2 points dollar-neutral, a market source said.

Luckin’s 0.75% notes continued to dominate activity in the secondary space with more than $12 million in reported volume early in the session and $20 million headed into the late afternoon.

Luckin Coffee’s equity traded as low as $36.34 and as high as $39.37 before closing the day at $37.12, a decrease of 9.09%.

Until last week when concern over the coronavirus began to shake markets, the 0.75% notes saw a meteoric rise.

The notes traded as high as 115 as recently as Jan. 17 and were expanded as much as 7 points dollar-neutral since pricing on Jan. 9.

While the notes have been taking a hit recently, they are still expanded 2 points dollar-neutral since pricing, a market source said.

China convertibles weak

Luckin’s convertible notes were the hardest hit of the convertible notes from China-based companies.

However, several convertible notes in the space were slightly weaker on Monday.

Pinduoduo’s 0% convertible notes due 2024 dropped about 3 points outright to 111.45 early in the session.

They rebounded as equity traded off their lows and were changing hands just shy of 113 in the mid-afternoon.

The Shanghai-based e-commerce platform’s ADS traded as low as $35.30 and as high as $37.04 before closing the day at $36.59, a decrease of 2.01%.

YY’s 0.75% convertible notes due 2025 dropped 2 points outright to 93.5 early in the session but rebounded to trade just shy of 94.5 by the mid-afternoon.

The Guangzhou, China-based social media company’s ADS traded as low as $56.08 and as high as $59.14 before closing the day at $58.31, a decrease of 1.65%.

Booking expands

Booking Holdings’ convertible notes were again major volume movers in the secondary space.

While the notes were down outright, they were expanded dollar-neutral as the travel site’s equity took a hit on Monday.

Booking’s 0.9% convertible notes due 2021 were down about 3 points outright. They were changing hands at 111.875 in the late afternoon.

The soon-to-mature 0.35% convertible notes due June 15, 2020 were down about 6 points outright. They were changing hands just shy of 145.5 in the late afternoon.

The notes were expanded about 0.25 to 0.5 point dollar-neutral, a source said.

Booking stock traded as low as $1,868.04 and as high as $1,917.90 before closing the day at $1,908.89, a decrease of 2.75%.

With travel restrictions beginning to be imposed to stymie the spread of the coronavirus, the travel site’s stock was especially heavy hit on a down day for the markets.

Mentioned in this article:

Booking Holdings Inc. Nasdaq: BKNG

Luckin Coffee Inc. Nasdaq: LK

Pinduoduo Inc. Nasdaq: PDD

YY Inc. Nasdaq: YY

© 2015 Prospect News.
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