Affirm, DigitalOcean convertibles below par; Bilibili up; Vonage skyrockets on buyout

By Abigail W. Adams

Portland, Me., Nov. 22 – It was a brutal day for outright accounts in the convertible bond secondary space on Monday as high-flying tech stocks got pummeled amid rising Treasury yields.

While the Dow Jones industrial average was able to stay in positive territory despite a round of late-day selling, other benchmarks closed the day in the red with the Nasdaq Composite the hardest hit.

The Dow closed the day up 17 points, or 0.05%, while the S&P 500 index finished down 0.32%, the Nasdaq Composite closed down 1.26% and the Russell 2000 index ended down 0.44%.

There was $91 million of secondary convertible bond trades on the tape about one hour into the session and $600 million in reported volume about one hour before the market close.

Several of the deals to price the previous week dropped below par as their stock got hit.

Affirm Holdings Inc.’s 0% convertible notes due 2026 gave back their outright gains and closed Monday well below par.

DigitalOcean Inc.’s 0% convertibles due 2026 also tanked on an outright basis with the notes also giving back their outright gains and falling well below par.

However, Bilibili Inc.’s 0.5% convertible notes due 2026 were on the rise as the ADR space improved amid growing optimism of a more accommodative monetary policy from Beijing.

While there was some pain in the secondary space on Monday, Vonage Holdings Corp.’s 1.75% convertible notes due 2024 were the winners of the day with the notes skyrocketing following news Ericsson would purchase the cloud-communications company.

Below par

Affirm Holdings’ 0% convertible notes due 2026 and DigitalOcean’s 0% convertibles due 2026 were under pressure on Monday as stock sold-off alongside the broader tech sector.

Affirm’s 0% convertible notes fell 2.5 points outright with stock off more than 9%.

The convertibles were changing hands at 99.5 versus a stock price of $129.99 early in the session.

They dropped to 98.5 versus a stock price of $126.09 in the late afternoon.

There was about $37 million in reported volume.

Affirm’s stock traded to a low of $118.86 and a high of $136.07 before closing the day at $123.51, a decrease of 9.29%.

DigitalOcean’s 0% convertible notes due 2026 sank more than 7 points outright with stock off almost 20%.

The notes were changing hands at 98.375 versus a stock price of $105.75 in the late afternoon.

While the notes were taking a hit on an outright basis, they were largely moving in line dollar-neutral, a source said.

There was $20 million in reported volume.

DigitalOcean’s stock traded to a low of $101.57 and a high of $124.84 before closing the day at $102.82, a decrease of 19.94%.

Affirm priced a $1.5 billion issue of the 0% convertible notes on Nov. 18 and Digital Ocean priced a $1.5 billion issue of the 0% convertible notes at par on Nov. 15.

Bilibili improves

After a rocky start in the aftermarket, Bilibili’s 0.5% convertible notes due 2026 improved alongside its equity on Monday.

The 0.5% convertible notes rose about 1 point outright to close the day above par.

The 0.5% notes were changing hands at 101.25 versus an equity price of $68.96 early in the session. However, they came in as the session progressed and were trading at 100.5 in the late afternoon.

There was about $29 million in reported volume.

Bilibili’s equity traded to a high of $70.16 and a low of $68.06 before closing the day at $68.71, an increase of 2.37%.

The Shanghai-based video sharing website’s convertible notes and equity improved as China signaled a more accommodative monetary policy.

Vonage’s buyout

Vonage’s 1.75% convertible notes due 2024 were the major winners of an otherwise brutal day in the convertibles secondary space.

The notes skyrocketed more than 15 points following news Ericsson would purchase the company in an all-cash transaction valued at $6.2 billion.

The 1.75% convertible notes jumped more than 15 points to trade at 132.75 in the late afternoon.

There was more than $36 million in reported volume.

The notes will be taken out in the transaction.

While there may be some dollar-neutral gains for hedge players, outright accounts will be the real winners of the transaction, a source said.

Vonage’s stock traded to a low of $20.38 and a high of $20.82 before closing the day at $20.79, an increase of 27%.

Ericsson will pay $21 a share for Vonage. The deal is expected to close in the first half of 2022.

Mentioned in this article:

Affirm Holdings Inc. Nasdaq: AFRM

Bilibili Inc. Nasdaq: BILI

DigitalOcean Inc. NYSE: DOCN

Vonage Holdings Corp. Nasdaq: VG

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