Redwood Trust convertible notes decline again; Redfin pares losses; Box notes come in

By Abigail W. Adams

Portland, Me., June 17 – It was a quiet day in the convertibles secondary space as equities recovered from Thursday’s brutal sell-off.

Indexes wavered between gains and losses before closing mixed.

The Dow Jones industrial average closed down 38 points, or 0.13%, the S&P 500 index closed up 0.22%, the Nasdaq Composite index closed up 1.43% and the Russell 2000 index closed up 0.96%.

Tech and small cap stocks led Friday’s rally after leading Thursday’s sell-off. However, the overall tone in the convertibles secondary space remained negative.

“There’s no reason for it,” a source said.

The lack of negative news seemed to be the catalyst driving markets higher, another source said.

Trading activity in the secondary space was relatively light heading into the long weekend with $57 million in reported convertibles trading volume about one hour into the session and $395 million on the tape about one hour before the market close.

There was no clear theme to the trading activity that did take place, which was mostly driven by accounts repositioning themselves.

Box Inc.’s 0% convertible notes due 2026 were volume movers on Friday with the notes weaker in active trading.

Redfin Corp.’s convertible notes pared their losses from the previous session when the notes got demolished after the real estate brokerage announced layoffs.

While volume was light, losses continued to mount for Redwood Trust Inc.’s recently priced 7.75% convertible notes due 2027 with the notes now trading on an 84-handle, a source said.

Box active

Box’s 0% convertible notes due 2026 saw heavy volume on Friday with the notes weaker in active trading.

The 0% convertible notes were down 1 point outright with stock up more than 5%.

The notes were changing hands at 109.75 heading into the market close.

There was $17 million in reported volume making the notes one of the most actively traded issues during Friday’s session.

Box’s stock traded to a high of $24.16 and a low of $22.64 before closing the day at $23.85, an increase of 5.32%.

Redfin pares losses

Redfin’s convertible notes saw a minor reprieve on Friday after getting demolished the previous session.

The online real estate brokerage’s 0.5% convertible notes due 2027 gained 1 point outright in thin volume to close Friday at 45 with the yield now 18.16%.

The 0% convertible notes due 2025 rose 0.5 point outright to trade just shy of 57.5.

Redfin’s stock recouped its losses from the previous session and traded to a low of $7.20 and a high of $7.80 before closing the day at $7.79, an increase of 7.60%.

While Redfin’s convertible notes pared their losses on Friday, they were destroyed during Thursday’s session.

The 0.5% convertible notes sank 10 points outright and the 0% convertible notes fell 6 points outright as stock fell more than 10% to set a new 52-week low of $7.13.

Redfin tanked after the company announced it was cutting its workforce by 8% as demand fell far below expectations.

Redfin is struggling alongside other mortgage services and REITs as mortgage rates skyrocket.

Redwood losses mount

Redwood Trust’s 7.75% convertible notes due 2027 continued to hemorrhage with the notes down 16 points outright within two weeks of pricing.

While volume was light, the 7.75% notes were changing hands on an 84-handle.

The notes were seen at 84.25 versus a stock price of $6.90 early in the session.

The yield was north of 12%.

Redwood’s stock traded to a low of $6.57 and a high of $7.08 before closing the session at $7.01, an increase of 3.55%.

The REITs convertible notes plunged in Monday’s sell-off when they dropped 8 points outright and continued to trend lower throughout the week.

Redwood priced a $200 million issue of the 7.75% convertible notes at par on June 6.

While market conditions have deteriorated across sectors, surging mortgage rates have hurt the valuation of REITs, a source said.

Mentioned in this article:

Box Inc. NYSE: BOX

Redfin Corp. Nasdaq: RDFN

Redwood Trust Inc. NYSE: RWT

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