SmileDirectClub convertibles volatile; MakeMyTrip, Pebblebrook trade up; Bill.com gains

By Abigail W. Adams

Portland, Me., Feb. 5 – New convertible paper was in focus on Friday with three deals totaling $1.07 billion hitting the secondary space.

SmileDirectClub Inc. priced an upsized $650 million of five-year convertible notes, MakeMyTrip Ltd. priced an upsized $200 million offering of seven-year convertible notes, and Pebblebrook Hotel Trust sold an upsized $215 million add-on to its 1.75% convertible notes due Dec. 15, 2026 after the market close on Thursday.

The offerings were met with massive demand during bookbuilding with all upsizing and pricing through initial talk.

While SmileDirectClub’s new convertible notes were strong out of the gate, the notes came in as the session progressed and were below par heading into the market close.

However, MakeMyTrip’s new paper and Pebblebrook Hotel’s 1.75% convertible notes were trading up on an outright and dollar-neutral basis.

Outside of the new paper, it was an active day in the secondary space as some convertible issuers saw outsized gains in their equity as benchmarks again broached new heights.

Bill.com Holdings Inc.’s 0% convertible notes due 2025 were in focus with the notes hitting their highest outright level since pricing and expanding dollar-neutral following its second-quarter earnings report.

Smile volatile

SmileDirectClub sold an upsized $650 million of five-year convertible notes after the market close on Thursday at par with a coupon of 0% and an initial conversion premium of 40%.

Pricing came in line with tightened talk for a fixed coupon of 0% and at the rich end of talk for an initial conversion premium of 35% to 40%, according to a market source.

Initial price talk was for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%, according to a market source.

The deal nearly doubled in size with the initial size of the offering $350 million.

The new paper was volatile in the secondary space.

They were changing hands at 102.75 early in the session and expanded about 2 points dollar-neutral, a source said.

However, the notes came in as the session progressed.

“The smiles turned to frowns,” a source said.

The 0% notes traded down to 99.5 in the late afternoon and gave up much of their dollar-neutral gains.

However, the 0% notes remained expanded about 0.25 to 0.5 point.

The shift in performance was attributed to the large upsize of the deal with the market for the notes saturated, a source said.

SmileDirectClub’s stock traded to a high of $13.14 and a low of $12.32 before closing the day at $12.54, a decrease of 2.75%.

MakeMyTrip expands

MakeMyTrip priced an upsized $200 million offering of seven-year convertible notes after the market close on Thursday at par with a coupon of 0% and an initial conversion premium of 37.5%, according to a market source.

Pricing came in line with tightened talk for a fixed coupon of 0% and at the rich end of tightened talk for an initial conversion premium of 35% to 37.5%, according to a market source.

Initial talk was for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%.

The initial size of the offering was $175 million.

The new paper traded as high as 106 as stock spiked early in the session.

They were changing hands around 104 versus a stock price of $28.50 in the late afternoon.

The notes expanded 2 to 3.75 points dollar-neutral, sources said.

MakeMyTrip’s stock traded to a high of $30.01 and a low of $28.12 before closing the day at $28.56, an increase of 1.33%.

Pebblebrook add-on gains

Pebblebrook priced an upsized $215 million add-on to its 1.75% convertible notes due Dec. 15, 2026 after the market close on Thursday with a reoffer price of 105.5.

Pricing came richer than initial talk for a reoffer price of 104.5 to 105, according to a market source.

The initial size of the offering was $175 million.

While Pebblebrook’s 1.75% notes were not active early in the session, activity picked up as the session progressed.

The notes traded well above their reoffer price. They traded as high as 107.5 and expanded about 2 points dollar-neutral, sources said.

“That one did very well,” a source said.

The allocations of the add-on were mostly to outright accounts with hedge players “missing the trade,” another source said.

While the reoffer price of 105.5 was tighter than initial talk, the add-on priced at a deep discount to their previous level with the notes in 4 to 5 points, a source said.

Holders were trying to bid the notes back up.

Pebblebrook stock traded to a high of $20.19 and a low of $19.56 before closing the day at $19.74, a decrease of 2.08%.

Bill.com gains

Bill.com’s 0% convertible notes due 2025 traded up to their highest outright level since pricing and expanded dollar-neutral on the heels of a blockbuster earnings report, which sent stock soaring.

The 0% convertible notes rose more than 20 points outright with stock up more than 30%.

The notes traded as high as 140 and were changing hands at 137.5 heading into the market close, according to Trace data.

The notes expanded as much as 1.5 points dollar-neutral early in the session, a source said.

Bill.com’s stock traded to a high of 190.30 and a low of $153.88 before closing the day at $184.69, an increase of 32.03%.

Stock soared after Bill.com’s second-quarter earnings report.

The cloud-based financial software company reported a loss per share of 3 cents versus analyst expectations for a loss per share of 8 cents.

Revenue was $54.05 million versus analyst expectations for revenue of $47 million.

Mentioned in this article:

Bill.com Holdings Inc. NYSE: BILL

MakeMyTrip Ltd. Nasdaq: MMYT

Pebblebrook Hotel Trust NYSE: PEB

SmileDirectClub Inc. Nasdaq: SDC

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