Morning Commentary: PDD Holdings convertible notes in focus early, gain on earnings

By Abigail W. Adams

Portland, Me., March 20 – The convertibles primary market remained idle early Wednesday as markets awaited the Federal Open Market Committee’s afternoon announcement and Federal Reserve chair Jerome Powell’s press conference.

Equity and Treasury markets were flat early Wednesday with few making moves until there was greater clarity on the timing of the Fed’s anticipated rate cuts.

The Dow Jones industrial average was up 39 points, or 0.10%, the S&P 500 index was up 0.02%, the Nasdaq Composite index was down 0.07% and the Russell 2000 index was up 0.03% shortly before 11 a.m. ET.

While broader markets were quiet early Wednesday, the secondary space saw some action with topical and earnings-related news driving volume.

There was $96 million in reported convertibles trading volume about one hour into the session with PDD Holdings Inc. (formerly known as Pinduoduo Inc.) in focus.

PDD Holdings’ 0% convertible notes due 2025 were on the rise alongside the Shanghai-based e-commerce company’s equity after an earnings beat.

The 0% convertible notes added 2 points outright with equity up as much as 5% in early trade.

The notes were trading at 100.25 versus an equity price of $135.46, according to a market source.

There was $18 million in reported volume.

PDD’s American Depositary Shares traded as high as $148.30 after the opening bell but came in to trade at $128.18, an increase of 0.39%, shortly before 11 a.m. ET.

The ADSs were on the rise after the company reported a large earnings beat with earnings per share of $17.32 versus analyst expectations for earnings of $11.89.

Revenue was $88.88 billion versus the expected $78.05 billion.

PDD Holdings’ 0% convertible notes due 2025 were among the comeback kings of 2023 with the notes exploding from busted territory to a balanced profile.

While the notes were putable in December 2023, few exercised the option with a substantial portion of the issue remaining outstanding.

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