Morning Commentary: Coinbase convertible notes lose more ground; Beyond Meat craters

By Abigail W. Adams

Portland, Me., May 12 – The convertibles secondary space remained active early Thursday with earnings related volatility continuing to drive trading activity.

While equity markets opened the day deep in the red, they pared their losses as the session progressed and were mixed shortly before 11 a.m. ET.

However, the equity of convertible issuers remained under pressure with disappointing earnings adding fuel to macro concerns.

The Dow Jones industrial average was down 66 points, or 0.21%, the S&P 500 index was up 0.23% the Nasdaq Composite index was up 1.08% and the Russell 2000 index was up 1.67% shortly before 11 a.m. ET.

There was $148 million in reported volume about one hour into the session.

Losses continued to mount for Coinbase Global Inc.’s 0.5% convertible notes due 2026 after a flash sale in cryptocurrencies drove Bitcoin down as much as 10% in overnight trading.

The 0.5% convertible notes were down another 6 points outright despite a rebound in the company’s stock.

The notes were changing hands at 53.5 early in the session with the yield now 16.813%, according to a market source.

There was $11.5 million in reported volume.

Coinbase’s stock was trading at $55.95, an increase of 3.63%, shortly before 11 a.m. ET.

Stock fell 26.40% after the cryptocurrency exchange announced a large earnings miss and included a new risk factor in its 10-Q report that sparked bankruptcy fears.

While Coinbase’s CEO assured investors the risk factor was the result of new SEC requirements and the company was not at risk of bankruptcy, the flash crash of cryptocurrencies due to the decoupling of TerraUSD, a stable coin that was tied to a $1 value, further fueled concerns.

However, Bitcoin turned positive alongside other risk assets after its 10% overnight drop and was changing hands at $29,665, an increase of 1.56%, shortly before 11 a.m. ET.

While investors lose faith in Coinbase’s fundamentals, Beyond Meat Inc. continued to raise red flags with its 0% convertible notes due 2027 plunging more than 10 points outright.

The 0% convertible notes were changing hands at 36.75 early in the session with the yield now north of 20.5%.

The plunge in the deeply distressed convertible notes continued despite a rebound in the company’s stock as markets gained strength.

Beyond Meat’s stock was trading at $29.34, an increase of 12.11%, shortly before 11 a.m. ET, despite trading down more than 10% to a new 52-week low of $20.50 shortly after the opening bell.

Stock was volatile after the plant-based food producer reported a large earnings miss.

Beyond Meat reported losses per share of $1.58 versus analyst expectations for earnings of 98 cents.

Revenue was $109.46 million versus analyst expectations for revenue of $111.60 million.

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