Wayfair, Nio, Valaris slide with shares after dour ISM number; some names struggle

By Rebecca Melvin

New York, Oct. 1 – A number of convertibles were down with lower shares on Tuesday as the new month got off to a shaky start after data showed a drop in U.S. manufacturing last month to the lowest level in more than 10 years.

The survey from the Institute for Supply Management said its index of national factory activity dropped 1.3 points to 47.8 in September, which was the lowest level since June 2009. A reading below 50 indicates contraction in the manufacturing sector.

The data, which followed a report last week showing consumer spending moderated in August, helped tank U.S. stocks.

In response, a number of convertibles dropped outright and China names, which weakened on Friday on delisting fears, continued to struggle.

Wayfair Inc.’s 1% convertibles due 2026, a $825 million issue that debuted in August, fell more than 4 points to 99, according to Trace data, while shares of the Boston-based e-commerce company fell $6.61, or 6%, to $105.55.

Nio Inc.’s American Depositary Shares dropped 23 cents, or 15%, on Tuesday to $1.32, and the 4.5% convertibles of the Chinese electric car maker that are due in 2024 dropped 6.25 points to 20.5.

The move lower in shares followed a 20% drop on Monday following a negative research note from Sanford C. Bernstein, in which the stock price target was cut, and the company’s delayed second-quarter earnings last week.

Valaris plc’s 3% convertibles due 2024 changed hands at 66 as the oilfield services company saw its shares that trade on the New York Stock Exchange slide 45 cents, or 9% to $4.36.

The ISM number heightens concerns about U.S. economic growth and the potential for a recession as the China-U.S. trade war persists and business confidence is undermined.

Meanwhile many of the new issues that priced in September, which was a banner month for convertibles issuance in terms of volume, continued to trade well below issue. Those deals include those of Etsy Inc., Okta Inc. and SailPoint Technologies Holdings Inc.

But there was also some notable trading action in both NXP Semiconductors NV’s 1% convertibles and the new Pinduoduo Inc. convertibles, according to a trading source.

The NXP Semiconductors 1% convertibles, which are due on Dec. 1, 2019, were trading higher at more than 111.5 with shares up more than 2%. Shares of the Netherlands-based semiconductor company were last up $2.24, or 2%, to $111.36.

KeyBanc analyst Weston Twigg upgraded the NXP shares from Sector Weight to Overweight earlier in the session.

Pinduoduo’s 0% convertible notes due 2024, which priced in September, were also a standout in trade, according to the market source.

The $875 million Pinduoduo issue has been consistently active since its market debut. Shares of the Chinese-based e-commerce platform were fractionally higher early Tuesday.

Some of the market’s highfliers this past year have seen shares come off sharply of late, including those of Exact Sciences Corp. Those 0.375% convertibles due 2027 were “hanging in there” despite a downturn in the underlying shares of the cancer diagnostics company, according to a market source. But they were still down on an outright basis.

The convertibles traded last on Monday at 108.4. That was down from previous trades ranging from 109 to 111, according to trace data.

Mentioned in this article:

Etsy Inc. Nasdaq: ETSY

Exact Sciences Corp. Nasdaq: EXAS

Nio Inc. NYSE: ADR: NIO

NXP Semiconductors NV Nasdaq: NXPI

Okta Inc. Nasdaq: OKTA

Pinduoduo Inc. Nasdaq: PDD

SailPoint Technologies Holdings Inc. NYSE: SAIL

Valaris plc NYSE: VAL

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