The crash of some of the flagbearers of the equity bubble in recent years has been painful for investors. We have seen “pandemic winner” Netflix dive 75 per cent from 2021 peaks, crypto exchange operator Coinbase plunge 86 per cent and the one-time meme stock and cinema chain AMC lose 80 per cent.
Less noticed are the losses of their bonds. The damage wreaked there is more moderate and offset by coupon payments — a Netflix bond maturing in 2030 has returned a negative 19 per cent from recent peaks, a Coinbase 2031 bond negative 36 per cent and an AMC 2026 bond negative 19 per cent. Some of this is to do with the very different capital structures of the individual companies and risks of the bonds compared with equities.
For hedge funds that profit from arbitrage trades across capital structures, such differences present a playground full of opportunities. But the gaps also illuminate differences in the ownership and return characteristics for stocks versus bonds.