DocuSign convertibles expand as stock slaughtered; China convertibles under pressure

By Abigail W. Adams

Portland, Me., Dec. 3 – There was more bloodshed on the Street on Friday as selling pressure returned amid more hawkish comments from Federal Reserve officials calling for an increased pace to tapering.

Tech sector and high-growth stocks again led losses.

The Dow Jones industrial average closed the day down 60 points, or 0.17%, the Nasdaq Composite closed down 1.92%, the S&P 500 index closed off 0.84% and the Russell 2000 index closed down 2.13%.

However, trading activity in the convertibles secondary space remained subdued with $560 million in reported volume about one hour before the market close.

DocuSign Inc.’s 0% convertible notes due 2024 were in focus as stock got slaughtered post-earnings.

While stock was “taken out to the street and shot,” the convertible notes were “holding like a rock,” a source said.

While down on an outright basis, the notes expanded on hedge.

Meanwhile, there was more pain in China-based convertible notes after DiDi Global Inc. announced it would delist from the New York Stock Exchange.

Bilibili Inc.’s recently priced 0.5% convertible notes due 2026 set a new all-time low with the notes now in the high 80s just two weeks after pricing.

Pinduoduo Inc.’s 0% convertible notes due 2025 were active although largely unchanged on an outright basis despite a steep drop in the company’s equity.

The convertible notes were already busted and now carry an attractive yield.

DocuSign in focus

DocuSign’s 0% convertible notes due 2024 were in focus on Friday as stock got slaughtered following the company’s earnings report.

The 0% notes were off 5 points outright with stock down 40%.

The notes were changing hands at 96.25 versus a stock price of $138.81 early in the session, a source said.

They were trading just north of 96 versus a stock price of $136.80 in the late afternoon, a source said.

The convertible notes were “doing exactly what they were supposed to do,” a source said.

While a 0% coupon, the notes now offered an attractive yield compared to Treasuries and hedge players made out on the stock move.

The notes expanded 2.5 points outright on a theoretical delta of 32.5%.

Hedge players using a heavier delta “made a ton of money,” a source said.

The yield on the notes was now 1.898%.

There was $31 million in reported volume.

DocuSign’s stock traded to a high of $155.40 and a low of $131.51 before closing the day at $135.09, a decrease of 42.22%.

While stock tanked on disappointing numbers, the company produces revenue and is not in danger of bankruptcy, a source said.

The stock move was either an indication that it was overvalued or that stock is now oversold.

Yikes

China-based convertible notes were active on Friday as their equity got hammered after DiDi Global Inc. announced it would delist from the NYSE.

Bilibili’s recently priced 0.5% convertible notes due 2026 were down another 5 points outright with stock off almost 7%.

The 0.5% notes were changing hands at 87.75 versus an equity price of $53.34 early in the session.

They were trading just shy of 88 versus an equity price of $54.77 in the late afternoon.

There was about $18 million in reported volume.

Bilibili’s ADS traded to a high of $57.26 and a low of $52.07 before closing the day at $54.94, a decrease of 7.15%.

The Shanghai-based video sharing website priced a $1.6 billion issue of the 0.5% notes at par on Nov. 18.

“Yikes,” a source said.

Pinduoduo’s 0% convertible notes due 2025 were also active although with little movement in price as equity slid more than 7%.

The 0% convertible notes were changing hands at 87.5 versus an equity price of $55.49 in the late afternoon.

There was almost $30 million in reported volume.

Pinduoduo’s ADS traded to a high of $57 and a low of $51.91 before closing the day at $54.44, a decrease of 8.16%.

While Pinduoduo’s equity continued its downward spiral on Friday, the convertible notes appeared to have found their bond floor.

With the conversion premium on the notes 250%, they were trading for their yield, which was about 6.8%.

Mentioned in this article:

Bilibili Inc. Nasdaq: BILI

DocuSign Inc. Nasdaq: DOCU

Pinduoduo Inc. Nasdaq: PDD

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.