Convertibles secondary weak; Teladoc the ‘disaster du jour’; Pioneer Resources active

By Abigail W. Adams

Portland, Me., April 28 – It was another volatile day in the convertibles secondary space as equity markets pared their losses from a brutal week after a mixed open.

While a strong open gave way to selling pressure early in the session, equities skyrocketed after 11:30 a.m. ET.

“That was a big reversal,” a source said.

The Dow Jones industrial average closed Thursday up 614 points, or 1.85%, the S&P 500 index closed up 2.47%, the Nasdaq Composite index closed up 3.06% and the Russell 2000 index closed up 1.80%.

The surge came following margin calls, a source said.

While equity markets were strong on Thursday, the convertibles secondary space still felt weak with several names lower on a dollar-neutral basis, a source said.

Teladoc Health Inc. was the disaster du jour of Thursday’s session with the convertible notes tanking on an outright and dollar-neutral basis as stock plunged following earnings.

Pioneer Natural Resources Co.’s deep-in-the-money 0.25% convertible notes due 2025 continued to see high-volume activity as holders took some profits off the table.

Sea Ltd.’s 0.25% convertible notes due 2026 were active as the company’s equity again set a new 52-week low during Thursday’s session.

Teladoc ‘disaster du jour’

Teladoc was the disaster du jour of Thursday’s session with the convertible notes tanking outright and contracting dollar-neutral as stock got nearly cut in half following earnings.

Teladoc’s 0.875% convertible notes due 2025 fell 11 points outright early in the session but pared their losses alongside stock as the session progressed.

The notes were off 9 points with stock down 33% in the late afternoon.

The 0.875% notes were changing hands at 83.625 versus a stock price of $29.93 early in the session, according to a market source.

The notes were trading at 85.875 versus a stock price of $33.35 in the late afternoon.

There was $24 million in reported volume.

Teladoc’s 1.25% convertible notes were down almost 7 points outright early in the session and 5 points outright in the late afternoon.

The convertibles were changing hands at 73.25 versus a stock price of $29.82 early Thursday and at 75 versus a stock price of $32.92 in the late afternoon.

There was $15 million in reported volume.

Teladoc’s stock traded to a low of $28.75 and a high of $34.40 before closing the day at $33.91, a decrease of 39.44%.

Stock cratered after the virtual health care company reported mixed earnings and cut its forward guidance.

Teladoc reported losses per share of 44 cents versus analyst expectations for losses of 52 cents.

Revenue was $565.35 million versus the $569.70 million expected.

While first-quarter losses were narrower than expected, the company cut its forward guidance.

Full-year revenue is now expected to be $2.4 billion to $2.5 billion versus the previously projected $2.55 billion to $2.65 billion.

Profit-taking

Pioneer Natural Resources’ deep-in-the-money 0.25% convertible notes due 2025 continued to see high-volume activity as holders cash in on a winning convertible note.

The 0.25% convertible notes were changing hands at 220.75 versus a stock price of $235.42 in the late afternoon.

The oil and gas exploration company’s stock traded to a low of $226.37 and a high of $237.50 before closing the day at $234.88, an increase of 1.41%.

While the convertible market has been on a downward trend throughout the year, Pioneer Natural Resources’ 0.25% convertible notes have moved in the opposite direction with the energy sector hot following Russia’s invasion of the Ukraine, which caused oil futures to spike.

While the notes traded as high as 240 in mid-April, they have come in alongside stock over the past two weeks.

The activity in the name over the past two sessions has most likely been the result of profit-taking, sources said.

Sea holds

Sea’s 0.25% convertible notes due 2026 were holding near their bond floor as the company’s equity again hit a 52-week low during Thursday’s session.

The 0.25% convertible notes continued to trade on a 75-handle.

They were changing hands at 75.5 versus an equity price of $84.95 in the late afternoon.

The yield on the notes was 6.832%.

Sea’s American Depositary Shares traded to a new 52-week low of $79.67 before popping back into positive territory as equity markets ripped.

The Singapore-based internet of things company’s ADRs traded to a high of $86.08 before closing the day at $84.70, an increase of 2.64%.

Sea’s ADRs have set a new 52-week low each day over the past week.

Mentioned in this article:

Pioneer Natural Resources Co. NYSE: PXD

Sea Ltd. NYSE: SE

Teladoc Health Inc. NYSE: TDOC

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