Convertibles secondary starts week slowly; Booking, Upstart active; SmileDirectClub up

By Abigail W. Adams

Portland, Me., Aug. 30 – It was a quiet start to the week in the convertibles secondary space as the S&P 500 index and Nasdaq Composite continued to broach fresh heights.

While the Dow Jones industrial average turned negative to close the day down 56 points, or 0.16%, and the Russell 2000 index closed the day down 0.34%, the S&P 500 closed the day up 0.43% and the Nasdaq Composite finished up 0.9%.

Despite a strong day for the tech sector and growth stocks, the summer doldrums were in full effect in the convertibles secondary space.

There was $280 million on the tape in the late afternoon with only a few names seeing concentrated trading activity, a source said.

Booking Holdings Inc.’s 0.9% convertible notes due Sept. 15, 2021 continued to dominate the tape as the notes approach their maturity.

Upstart Holdings Inc.’s recently priced 0.25% convertible notes due 2026 were also active although unchanged on the day.

While volume in the name was light, SmileDirectClub Inc.’s 0% convertible notes due 2026 improved on an outright and dollar-neutral basis as stock skyrocketed during Monday’s session.

End-of-life trade

Booking Holdings’ 0.9% convertible notes due Sept. 15, 2021 continued to dominate trading as the notes approach their maturity.

The 0.9% notes were changing hands around 108 in active trading.

There was more than $20 million in reported volume.

The notes, which are in their averaging period, have been mainstays on the volume charts for the past two weeks.

“It’s the end-of-life trade,” a source said.

Booking’s stock traded to a high of $2,306.57 and a low of $2,270.42 before closing the day at $2,277.71, a decrease of 1.2%.

Upstart active

Upstart’s recently priced 0.25% convertible notes due 2026 were among the most actively traded issues in the secondary space on Monday.

However, the notes were largely unchanged.

The notes were changing hands just shy of 110.25 with stock off slightly early in the session.

They continued to trade on a 110-handle heading into the afternoon.

There was $15 million in reported volume.

After hitting a new 52-week high of $228 shortly after the open, Upstart Holdings’ stock turned negative shortly into Monday’s session.

Stock traded to a low of $215.33 before closing the day at $215.64, a decrease of 3.38%.

SmileDirectClub improves

SmileDirectClub’s 0% convertible notes due 2026 improved on an outright and dollar-neutral basis as stock surged on Monday.

While volume in the name was light, the 0% notes were up about 1 point outright.

They were changing hands just shy of 70 in the late afternoon.

The notes improved about 0.5 point dollar-neutral, a source said.

SmileDirectClub’s stock surged as much as 20% in intraday activity before giving back much of its gains.

Stock traded to a high of $6.23 and a low of $5.15 before closing the day at $5.34, an increase of 3.09%.

The intraday surge was most likely the result of a short squeeze with the stock heavily shorted, a source said.

However, news that Democrats are working to add dental benefits to Medicare provided the stock with positive momentum.

SmileDirectClub’s stock and convertible notes have long struggled since the teledentistry company priced the $747.50 million issue at par in mid-February.

The notes traded down to the 67 to 68 range following disappointing earnings on Aug. 9.

Mentioned in this article:

Booking Holdings Inc. Nasdaq: BKNG

SmileDirectClub Inc. Nasdaq: SDC

Upstart Holdings Inc. Nasdaq: UPST

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