Enovis convertible offering eyed; Semtech launches, pulls placement; Rivian falls

By Abigail W. Adams

Portland, Me., Oct. 19 – The convertibles primary market awakened on Thursday with one deal launching before the window of opportunity for new issuance officially drew to a close.

Enovis Corp. plans to price $400 million of five-year convertible notes after the market close on Thursday.

The deal looked optically attractive and modeled cheap based on underwriters’ assumptions.

It was heard to be playing to strong demand and is expected to do well on its aftermarket debut.

Semtech Corp. also launched a $250 million offering of five-year convertible notes pre-open on Thursday.

While there was widespread interest in the deal, it turned out to be a “private private,” sources said.

J.P. Morgan Securities LLC was running the 4a2 private placement, which was limited to a small group of investors.

With Semtech’s stock down more than 22% on the heels of the offering, word on the street was that the deal got pulled.

However, there was no official confirmation or press release about the pulled offering by press time.

The new deal activity comes during the traditional lull in primary market activity as earnings get underway.

The lull in activity has been compounded by a badly bruised stock and bond market that is once again pricing in additional rate increases and a higher for longer rate environment.

The destruction in small cap stocks and growth companies with high cash burn rates may be a deterrent for future primary market activity with traditional convertible issuers getting squeezed by the high cost of capital.

However, the rate environment may also stimulate primary market activity with crossover issuers continuing to turn to the convertibles market, which remains comparatively cheap, sources said.

Meanwhile, the secondary space was quiet on Thursday on a volatile day for markets as comments by Federal Reserve chair Jerome Powell simultaneously supported market bets for a pause in rate increases and a higher for longer rate environment.

Equity indexes were mixed at the open, dropped into negative territory as the session progressed, bounced to positive territory surrounding Powell’s comments but sank back into the red by the close.

The Dow Jones industrial average closed Thursday down 251 points, or 0.75%, the S&P 500 index closed down 0.85%, the Nasdaq Composite index closed down 0.96% and the Russell 2000 index closed down 1.51%.

There was $31 million in reported volume about one hour into the session and $333 million on the tape heading into the market close with high-grade names continuing to dominate the tape.

While the market was quiet, there was no shortage of large movements in the space.

Rivian Automotive Inc.’s recently priced 3.625% convertible notes due 2030 continued to see outsized outright price swings with the notes reapproaching their lows and contracting on the move down after hitting their highest outright level since pricing two sessions ago.

PTC Therapeutics Inc.’s 1.5% convertibles due 2026 shot higher as stock gained double digits on the heels of a highly lucrative royalty deal.

Enovis in focus

Enovis plans to price $400 million of five-year convertible notes after the market close with price talk for a coupon of 3.625% to 4.125% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 350 basis points over SOFR and a 26% vol.

Using those assumptions, the deal looked a couple points cheap at the midpoint of talk and was optically attractive, a source said.

The deal is unique in that it is coming in support of M&A activity and carries a special call provision.

The medical technology company is in the process of completing its $840 million acquisition of Italy-based surgical implant manufacturer LimaCorporate SpA.

Proceeds, together with borrowings under a new term loan and cash on hand, will be used to fund the cash purchase price of the acquisition.

The notes will be redeemed at 101 plus accrued interest if the company’s acquisition of LimaCorporate is not consummated by June 30, 2024.

They are otherwise non-callable.

The deal was heard to be playing to solid demand with books closing in the early afternoon.

The notes are expected to do well in the secondary.

Rivian approaches low

Rivian’s 3.625% convertible notes due 2030 continued to see large outright price swings as the stock’s wild ride continued.

The 3.625% notes plunged below par with the notes reapproaching their lows after hitting their highest outright level since pricing on Tuesday.

The 3.625% convertible notes were down 3.5 points outright with stock off more than 4%.

They were trading at 95.875 versus a stock price of $17.39 in the late afternoon, according to a market source.

The notes contracted on the move down, a source said.

There was $6 million in reported volume.

Rivian’s stock traded to a low of $17.07 and a high of $17.99 before closing at $17.16, up 5.14%.

Rivian’s notes traded as high as 106 on Tuesday.

PTC Therapeutics jumps

PTC Therapeutics’ 1.5% convertibles due 2026 made large gains in active trade on Thursday after the company announced a royalty agreement.

The 1.5% notes jumped 8 points with stock up more than 15%.

The notes were trading at 84.75 versus a stock price of $25 in the late afternoon, according to a market source.

There was $7 million in reported volume.

PTC Therapeutics’ stock traded to a low of $21 and a high of $25.28 before closing at $23.57, an increase of 14.98%.

Stock surged following news PTC signed a deal with Royalty Pharma plc with PTC to receive $1 billion in cash for 67% of the outstanding royalties on the spinal muscular atrophy treatment Everysdi.

PTC will have the option to sell the remaining royalties for $500 million.

While stock surged on Thursday, it is still down 7.4% on the month and has fallen 56% over the past six months.

PTC’s stock plunged in mid-September after European regulators issued a negative opinion of PTC’s treatment for muscular dystrophy and voted against renewing conditional approval.

Stock also plunged in May after the company announced that it was discontinuing its gene therapy programs after a failed clinical trial.

Mentioned in this article:

Enovis Corp. NYSE: ENOV

PTC Therapeutics Inc. Nasdaq: PTCT

Rivian Automotive Inc. Nasdaq: RIVN

Semtech Corp. Nasdaq: SMTC

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