Kadmon prices upsized convertible notes; Zynga gains outright; Illumina notes active

By Abigail W. Adams

Portland, Me., Feb. 11 – The convertibles primary market rolled out the last new deal of the week on Thursday.

In an overnight deal, Kadmon Holdings Inc. priced an upsized $200 million of six-year convertible notes prior to the market open.

However, the wall-crossed offering was not active in the aftermarket.

Meanwhile, it was another active day in the secondary space with earnings pushing outstanding issues into focus.

There was $107.5 million on the tape about one hour into the session and $675 million on the tape about one hour before the market close, sources said.

Zynga Inc.’s convertible notes were active and making gains on an outright basis as stock hit a new 52-week high on the heels of its earnings report.

Illumina Inc.’s convertible notes also saw heavy volume following its fourth-quarter earnings report. However, the notes were largely unchanged.

Peloton Interactive Inc.’s 0% convertible notes due 2026 remained active with the notes continuing to climb alongside stock.

Kadmon upsizes

In an overnight deal, Kadmon priced an upsized $200 million of six-year convertible notes prior to the market open on Thursday at par with a coupon of 3.625% and an initial conversion premium of 30%.

Pricing came toward the rich end of talk for a coupon of 3.25% to 3.75% and at the rich end of talk for an initial conversion premium of 25% to 30%, according to a market source.

The deal was marketed with assumptions of 850 basis points over Libor and a 45% vol., a source said.

Using those assumptions, the deal looked 7.9 points cheap based on final pricing terms.

The new paper was not active in the secondary space.

The deal was wall-crossed and came with a 90-day lock-up, sources said.

Zynga’s earnings

Zynga’s two tranches of convertible notes returned to focus in the secondary space with the notes making gains on an outright basis as stock hit a new 52-week high following the social game developer’s earnings report.

The 0% convertible notes due 2026 rose more than 5 points outright.

They were changing hands at 119.25 versus a stock price of $12.23 in the late afternoon, according to a market source.

There were more than $32.8 million of the bonds on the tape.

Zynga’s 0.25% convertible notes due 2024 were up more than 9 points outright to 156.375 with about $8 million in reported volume.

Zynga’s stock traded to a low of $11.11 and a new 52-week high of $12.27 before closing the day at $11.98, an increase of 7.35%.

Stock was on the rise after Zynga reported adjusted earnings of $173 million on sales of $699 million versus analyst expectations for earnings of $141 million on sales of $678 million, investors.com reported.

Illumina active

Illumina’s two tranches of convertible notes saw heavy volume on Thursday following its fourth-quarter earnings report.

Illumina’s soon-to-mature 0.5% convertible notes due June 15, 2021 topped the volume charts with more than $50 million on the tape heading into the market close.

The notes were changing hands at 174 versus a stock price of $447.96, according to a market source.

Illumina’s 0% convertible notes due 2023 were also active with more than $27 million in reported volume.

The 0% notes due 2023 were changing hands at 125.5 versus a stock price of $447.76.

The notes were largely unchanged in the high-volume activity.

Holders appeared to migrating from the shorter-duration to the longer-duration notes.

Illumina’s stock was largely flat on Thursday. It traded to a high of $456.66 and a low of $445.51 before closing the day at $451.22, an increase of 0.27%.

Illumina reported earnings per share of $1.22 on revenue of $953 million in the fourth-quarter, which beat analyst expectations for earnings of $1.11 per share on revenue of $953 million, investors.com reported.

However, guidance fell short of expectations with Illumina expecting earnings of $5.10 to $5.35 per share in 2021 versus analyst expectations for earnings of $5.80 per share.

Peloton gains continue

Peloton’s 0% convertible notes due 2026 remained active with the notes’ upward momentum continuing.

The 0% notes rose another 1 point outright with stock up about 1%.

They were changing hands at 108 versus a stock price of $146.24, according to a market source.

There was more than $33 million on the tape.

Peloton reported that its underwriters exercised an over-allotment option in full on the 2026 convertibles, lifting the deal to $1 billion from $875 million.

Peloton’s stock traded to a high of $148.04 and a low of $144 before closing the day at $146.48, an increase of 0.99%.

The 0% notes have made steady gains since their aftermarket debut on Tuesday.

Mentioned in this article:

Illumina Inc. Nasdaq: ILMN

Kadmon Holdings Inc. Nasdaq: KDMN

Peloton Interactive Inc. Nasdaq: PTON

Zynga Inc. Nasdaq: ZNGA

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