Infinera convertible notes jump on secondary debut; Coinbase paper gains; Lucid falls

By Abigail W. Adams

Portland, Me., Aug. 4 – The tone in the convertibles market has markedly improved over the past few sessions, supported by a surge in primary market activity.

While no new deals launched on Thursday, the primary market has priced $1.575 billion over three deals in the past week.

“People are feeling better,” a source said. Potential issuers “are starting to inquire.”

Infinera Corp. became the latest refinancing deal to clear the primary market with the company pricing an upsized $325 million of six-year convertible notes after the market close on Wednesday.

The new paper hit the secondary space on a choppy day for equity markets with indexes trading on either side of flat before closing the day mixed.

The Dow Jones industrial average closed down 86 points, or 0.26%, the S&P 500 index closed down 0.08%, the Nasdaq Composite index closed up 0.41%, and the Russell 2000 index closed down 0.13%.

While losses continued to mount for Infinera’s stock, which took a beating the previous session, the new convertible notes skyrocketed on debut.

Infinera’s new paper dominated the tape on Thursday and saw $622 million in reported volume heading into the market close.

However, earnings-related volatility and topical news continued to push outstanding issues into the spotlight.

Coinbase Global Inc.’s badly battered 0.5% convertible notes due 2026 made large outright gains and improved dollar-neutral following news of a new partnership with BlackRock.

However, Lucid Group Inc.’s 1.25% convertible notes due 2026 fell outright as stock tanked double digits post-earnings.

Infinera jumps on debut

Infinera priced an upsized $325 million of six-year convertible notes after the market close on Wednesday at par with a coupon of 3.75% and an initial conversion premium of 32.5%.

Pricing was mixed with the notes coming at the cheap 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 27.5% to 32.5%.

The greenshoe was also upsized to $48.75 million.

The initial size of the offering was $275 million with a greenshoe of $41.25 million.

The notes skyrocketed out of the gate.

The 3.75% convertible notes were marked at 103.75 bid, 104.5 offered early in the session.

They were changing hands in the 103 to 103.5 context heading into the market close.

The notes expanded 3 points on swap, a source said.

Losses continued to mount for Infinera’s stock, which sank about 20% on Wednesday following the convertible notes announcement.

Stock traded to a low of $4.93 and a high of $5.28 before closing the day at $5.09, a decrease of 0.68%.

Approximately $283.6 million of proceeds will be used to repurchase an aggregate principal amount of $300 million of the company’s 2.125% convertible notes due 2024 in privately negotiated transactions.

However, the buyback did not appear to have occurred yet with no trades on Trace in the 2.125% notes, a source said.

Coinbase’s earnings

Coinbase’s badly battered 0.5% convertible notes due 2026 made large gains on an outright and dollar-neutral basis on Thursday following news of a new partnership with BlackRock.

The cryptocurrency exchange’s convertible notes jumped 6 points outright with stock up about 10%.

The notes were wrapped around 72 in the late afternoon with the yield about 9 3/8%.

The notes gained dollar-neutral on the move up, a source said.

Gauging the amount of the expansion in the high-premium notes largely depends on the delta the notes are played on, which varies among market players.

However, the theoretical delta is about 50%, a source said.

While there were some swap trades on the tape on Thursday, the majority of prints were outright.

Coinbase’s stock traded to a high of $116.30 and a low of $86.78 before closing the day at $88.90, an increase of 10.01%.

While well off the highs of the day, stock surged following news Coinbase was partnering with BlackRock to offer crypto-trading, custody and prime brokerage services to BlackRock’s institutional clients.

The news marked a dramatic shift in sentiment toward Coinbase, whose stock saw a dramatic sell-off the previous week following news the Securities and Exchange Commission launched an investigation into the company.

The company is scheduled to report earnings on Aug. 9.

Lucid falls

Lucid’s 1.25% convertible notes due 2026 fell on an outright basis as stock tanked following a large earnings miss.

The 1.25% notes were down 3 points outright with stock off 10%.

The notes were trading around 65 heading into the market close with the yield about 11¾%, sources said.

Lucid’s stock traded to a high of $18.86 and a low of $18 before closing the day at $18.56, a decrease of 9.73%.

Stock tanked after the electric vehicle startup announced a large earnings miss and slashed its production guidance.

Lucid announced losses per share of 33 cents versus analyst expectations for losses of 31 cents.

Revenue was $97.43 million versus analyst expectations for revenue of $157.12 million.

In addition to a large revenue miss, the company again slashed its production target to 6,000 to 7,000 vehicles.

Previous estimates were for 12,000 to 14,000 vehicles, which was downwardly revised from the initial 20,000 estimate for 2022.

Mentioned in this article:

Coinbase Global Inc. Nasdaq: COIN

Infinera Corp. Nasdaq: INFN

Lucid Group Inc. Nasdaq: LCID

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.