ConMed convertible notes come in; Asian names ‘hot’ in secondary market; Zendesk active

By Abigail W. Adams

Portland, Me., June 8 – A relatively quiet morning in the convertibles secondary space turned into an active session on another choppy day for equity markets as the 10-year Treasury yield again pushed past the 3% threshold.

While indexes were mixed early, they closed the day in the red with small cap stocks underperforming.

The Dow Jones industrial average closed down 269 points, or 0.81%, the S&P 500 index closed down 1.08%, the Nasdaq Composite index closed down 0.73% and the Russell 2000 index closed down 1.49%.

There was $100 million in reported volume about one hour into the session and $487 million on the tape about one hour before the market close.

ConMed Corp.’s recently priced 2.25% convertible notes due 2027 continued to dominate the tape with the notes giving back all of their outright and much of their dollar-neutral gains after a strong aftermarket debut.

Asian names remained “hot,” a source said, with the convertible notes of several China-based companies sought after as Beijing continued to signal an end to its regulatory crackdown.

Pinduoduo Inc.’s 0% convertible notes due 2025 continued to add in heavy volume.

Hello Group Inc.’s (formerly Momo Inc.) 1.25% convertible notes due 2025 also saw a significant move to the upside as buyers seek out bargains in the ADR space.

Zendesk Inc.’s 0.625% convertibles due 2025 were lower outright alongside stock in active trading after CNBC’s Dan Faber questioned the probability of a takeover of the company.

ConMed comes in

ConMed’s recently priced 2.25% convertible notes due 2027 continued to dominate the tape with the notes falling below par and giving back much of their dollar-neutral gains after a strong start in the secondary space.

The 2.25% notes were changing hands just shy of 101 versus a stock price of $110.68 early in the session.

They fell below par as stock continued to come in as the session progressed.

The notes were trading at 99.875 versus a stock price of $108.78 in the late afternoon. They were contracting dollar-neutral on the move down, a source said.

There was $25 million in reported volume.

ConMed’s stock was volatile alongside broader markets early Wednesday.

Stock briefly entered into positive territory and traded as high as $111.25 before sinking back into the red.

Stock traded to a low of $108 and a high of $111.25 before closing the day at $108.62, a decrease of 1.99%.

ConMed’s 2.25% convertible notes traded as high as 105 on their market debut and expanded 2.5 points dollar-neutral on June 2.

However, the notes have given back all gains outright and much of their dollar-neutral expansion over the past few sessions.

While the notes have contracted 1.75 points dollar-neutral since last Friday, they have been able to maintain a 0.75 point expansion.

Asian names ‘hot’

While the overall convertibles market was mixed amid the choppiness in equities, the convertible notes of China-based companies continued to see buyers.

“Asian names are hot,” a source said.

Pinduoduo’s 0% convertible notes due 2025 continued to add in heavy volume.

The Shanghai-based e-commerce platform’s 0% notes rose another 0.5 point during Wednesday’s session.

They traded up to 90.875 versus an equity price of $63.49.

The yield on the notes was now 6.59%.

There was $11 million in reported volume.

While the long-busted convertible notes move on a light hedge, Pinduoduo’s equity continued to skyrocket.

The company’s American Depositary Shares traded to a high of $66.53 and a low of $60.57 before closing the day at $64.95, an increase of 9.73%.

The ADSs have gained more than 85% over the past month.

Hello Group’s, the company formerly known as Momo, 1.25% convertible notes due 2025 also saw a significant move to the upside.

While volume was light, the 1.25% notes traded up to 91.5 on Wednesday with the yield now 4.24%.

The Beijing-based mobile social networking platform’s 1.25% notes have gained more than 4 points outright since last week.

“They don’t move on hedge, so that’s a big move,” a source said.

Buyers continued to seek out discounts in the ADR space with more positive signs emerging that Beijing was easing its crackdown on the tech sector.

News broke Wednesday that Chinese authorities approved 60 new video games and reports continue to circulate about regulators ending their probe of ride-sharing company Didi Global Inc.

Zendesk active

Zendesk’s 0.625% convertibles due 2025 were down an outright basis as stock declined with the company’s prospects as a takeover candidate once again questioned.

The 0.625% notes fell 3.25 points outright with stock off more than 6%.

The notes were changing hands at 102.5 versus a stock price of $80.36 in the late afternoon.

There was $12 million in reported volume.

Zendesk’s stock traded to a high of $88.02 and a low of $76.82 before closing the day at $80.52, a decrease of 6.92%.

Stock fell after CNBC’s Dan Faber spoke against the likelihood of the software company as a takeover target.

The 0.625% convertible notes traded as high as 130 in mid-April following news the company was exploring a sale, which activist investor Jana Partners had long pushed for.

However, the notes and stock have been on a strong downtrend since May alongside the broader tech sector.

Mentioned in this article:

ConMed Corp. NYSE: CNMD

Hello Group Inc. Nasdaq: MOMO

Pinduoduo Inc. Nasdaq: PDD

Zendesk Inc. NYSE: ZEN

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