Luckin Coffee nosedives on short-seller report; BofA synthetic rebounds; Live Nation up

By Abigail W. Adams

Portland, Me., Jan. 31 – Several recent issues were in focus in the convertibles secondary space, which closed out the week with decent trading volume – although it paled in comparison to previous weeks.

There was $83 million on the tape about one hour into Friday’s session and $400 million in reported volume by the mid-afternoon.

Luckin Coffee Inc.’s 0.75% convertible notes due 2025 were again at the top of the volume charts with the notes nosediving following a short-seller report.

While the notes have been slow to trade since pricing, BofA Finance LLC’s 0.125% cash-settled notes tied to Charter Communications Inc. due Sept. 1, 2022 were in focus on Friday with the notes rebounding following Charter’s earnings report.

Live Nation Entertainment Inc.’s newly priced 2% convertible notes due 2025 continued to gain on both an outright and dollar-neutral basis.

Luckin Coffee nosedives

Luckin Coffee’s 0.75% convertible notes due 2025 nosedived on Friday following a short-seller’s report which alleged the Beijing-based coffee shop chain had fabricated some financial information.

The notes dropped as much as 10 points in intraday trading.

They traded as low as 82 and as high as 90 before closing out the day at 87.

The 0.75% notes contracted 1 point to 1.5 points on a dollar-neutral, or hedged, basis, a market source said.

They were contracted 3 points on the week – giving back all of their gains since the notes hit the secondary space.

Luckin Coffee’s ADS tanked on Friday. Luckin’s equity traded as low as $26.75 and as high as $36.17 before closing the day at $32.49, a decrease of 10.74%.

The equity tanked on Friday after short-seller Muddy Waters Capital announced it was shorting the stock after receiving an anonymous report alleging the company had fabricated some financial information.

However, Citron Research, also a short-seller that commonly targets China-based companies, disputed the allegations made in the anonymous report and announced it was taking a long position in the company.

Luckin’s convertible notes have been under pressure for much of the week as the coronavirus shook markets.

The short-seller report pushed the notes to their lowest level since pricing.

The 0.75% notes traded as high as 115 as recently as Jan. 17.

BofA synthetic rebounds

BofA Finance’s cash-settled 0.125% notes due 2022 tied to Charter saw a dramatic rebound on Friday with the notes rising above their issue price.

The 0.125% notes climbed more than 3 points outright.

They were changing hands between 102.375 and 102.625 early in the session and rose to 104 in the late afternoon.

BofA priced a downsized $300 million of the 0.125% notes at 103.25 on Jan. 22.

While the 0.125% notes have been slow to trade, they saw high-volume activity on Friday as Charter stock jumped following a large fourth-quarter earnings beat.

Charter stock traded as low as $495.00 and as high as $521.69 before closing the day at $517.46, an increase of 4.97%.

Charter reported earnings per share of $3.28 versus analyst expectations for earnings per share of $2.52.

Revenue was $11.76 billion versus analyst expectations for revenue of $11.73 billion.

Live Nation improves

While activity tempered during Friday’s session, Live Nation Entertainment’s newly priced 2% convertible notes due 2025 continued to gain.

The 2% notes were changing hands just shy of 100.75 on Friday with stock off.

The notes expanded another 0.25 point to 0.5 point dollar-neutral.

Live Nation stock traded as low as $68.01 and as high as $70.53 before closing the day at $68.16, a decrease of 3.52%.

The notes expanded about 1 point on a dollar-neutral basis on their market debut on Thursday.

Mentioned in this article:

Charter Communications Inc. Nasdaq: CHTR

Live Nation Entertainment Inc. NYSE: LYV

Luckin Coffee Inc. Nasdaq: LK

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