Southwest Airlines convertibles in focus, improve; Coinbase, Marathon Digital hit lows

By Abigail W. Adams

Portland, Me., May 2 – It was a quiet day in the convertibles secondary space as the roller-coaster in equity markets continued.

Indexes wavered between strong gains and losses throughout the session before late-day buying solidified them in the green.

The Dow Jones industrial average closed Monday up 84 points, or 0.26%, the S&P 500 index closed up 0.57%, the Nasdaq Composite index closed up 1.63% and the Russell 2000 index closed up 0.97%.

There was $22 million in reported volume about one hour into the session and $278 million on the tape about one hour before the market close.

“It’s because there’s no disaster du jour today,” a source said of the lack of volume in the space.

While there was plenty of topical news surrounding convertibles issuers, it did not translate into trading activity in the secondary space.

News broke on Monday that Spirit Airlines Inc. had rejected JetBlue Airways Corp.’s takeover bid in favor of the initial offer from Frontier Airlines.

While the convertible notes of both Spirit and JetBlue were weaker following the news, they were not active, a source said.

However, Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) dominated the tape with the notes improving dollar-neutral.

Convertible notes with exposure to Bitcoin were under pressure on Monday with Coinbase Global Inc.’s 0.5% convertible notes due 2026 and Marathon Digital Holdings, Inc.’s 1% convertible notes due 2026 hitting new all-time lows.

Airbnb Inc.’s 0% convertible notes due 2026 were also down in active trading on the eve of the company’s earnings report.

Southwest improves

While Spirit Airlines’ rejection of JetBlue’s unsolicited takeover bid captured Monday’s headlines, it was Southwest Airlines’ 1.25% convertible notes due 2025 that dominated activity in the secondary space.

Southwest’s 1.25% convertible notes due 2025 were down on an outright basis on a red day for the airline’s stock.

However, the notes improved dollar-neutral.

The 1.25% notes were trading at 134.875 versus a stock price of $45.48 in the late afternoon.

They gained 0.5 point dollar-neutral, a source said.

There was $40 million in reported volume.

“Somebody wants some LUV,” a source said.

Southwest’s stock traded to a high of $47.06 and a low of $45.26 before closing the day at $46.53, a decrease of 0.41%.

Bitcoin bust

Convertible notes with exposure to Bitcoin were taking a hit on Monday with both Coinbase’s 0.5% convertible notes due 2026 and Marathon Digital’s 1% convertible notes due 2026 hitting new outright lows in high-volume activity.

Coinbase’s 0.5% convertible notes were down about 0.5 point outright as stock jumped more than 7%.

The notes traded down to a new all-time low of 79.875 in the late afternoon.

The busted convertible notes were now yielding 6.17%.

There was $8 million in reported volume.

Coinbase’s stock traded to a low of $111.80 and a high of $122.29 before closing the day at $121.34, an increase of 7.66%.

While the crypto-currency exchange platform’s stock was on the rise on Monday, it is down more than 50% year to date and almost 100% since the convertible notes priced in May 2021.

Marathon Digital’s 1% convertible notes due 2026 also hit a fresh low on Monday despite a green day for the company’s stock.

The 1% notes sank another 1 point outright to a 59-handle, according to a market source.

The notes were now yielding north of 13%.

There was $7 million in reported volume.

The Bitcoin miners’ stock traded to a low of $15.05 and a high of $16.92 before closing the day at $16.66, an increase of 6.79%.

The company’s stock has dropped about 50% year to date.

Bitcoin was changing hands at $38.454, an increase of 1.43%, shortly before 5 p.m. ET.

There has been little action in the convertibles secondary space amid the carnage in equities until recently.

However, holders were beginning to get restless with losing positions and looking to offload them at more realistic prices, a source said.

Airbnb down

Airbnb’s 0% convertible notes due 2026 saw some action on Monday with the notes coming in alongside stock on the eve of the company’s earnings report.

The 0% convertible notes were down about 1.5 point outright with stock off more than 3% in intraday activity.

The notes were changing hands at 92 versus a stock price of $153.33 early in the session.

They traded down to 91 versus a stock price of $149.80 in the late afternoon.

There was $6 million in reported volume.

Airbnb’s stock traded to a high of $155.13 and a low of $147.21 before closing the day at $152.78, a decrease of 0.28%.

The online vacation rental marketplace is scheduled to report earnings on Tuesday.

Mentioned in this article:

Airbnb Inc. Nasdaq: ABNB

Coinbase Global Inc. Nasdaq: COIN

JetBlue Airways Corp. Nasdaq: JBLU

Marathon Digital Holdings, Inc. Nasdaq: MARA

Southwest Airlines Co. NYSE: LUV

Spirit Airlines Inc. NYSE: SAV

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