LinkedIn jumps outright, flat to slightly lower on swap; Iconix adds on exchange; ImmunoGen on tap

By Rebecca Melvin

New York, June 13 – LinkedIn Corp.’s convertibles jumped in very active trading Monday on news that Microsoft Corp. has agreed to buy the professional-oriented social media site for about $26.2 billion, or $196 per share, which represents a 50% premium to LinkedIn’s closing share price on Friday.

LinkedIn’s 0.5% convertibles due 2019 jumped about 6 points on an outright basis, but were flat to slightly lower on a dollar-neutral, or hedged, basis, a New York-based trader said.

“For outrights, it was a win, but on hedge, they were unchanged to a small loser,” the trader said.

Twitter Inc.’s convertibles were pulled into trading as market players speculated that there may be more acquisitions in store involving social media companies. The Twitter convertibles were up 1.5 points on swap amid this M&A speculation, as unfounded as it was, the trader said.

FireEye Inc. was another name in focus on Monday amid M&A news.

The FireEye bonds were up 0.5 point “at the most,” and its move was related to news that fellow software security company, Symantec Corp., is acquiring internet security firm Blue Coat Inc. for $4.65 billion.

Under the agreement, Blue Coat chief executive Greg Clark will take over as chief executive of Symantec. Silver Lake, a private equity firm that is backing the deal, said it would double the $500 million investment in convertible notes in Symantec that it announced in February. Private security firm Bain Capital, which is the majority shareholder in Blue Coat, said it will invest $750 million in convertible notes.

Also trading actively on Monday were Iconix Brand Group Inc.’s 1.5% convertibles due 2018 after the New York-based brand management company agreed to exchange $104.95 million of the senior subordinated notes due 2018 for $35.2 million in cash and up to 6.8 million shares.

The Iconix 1.5% convertibles traded at 81.5, a trader said. Previously the bonds had traded with a 78 handle. Iconix shares were down for most of the session and closed at the lows, down 62 cents, or 8%, at $7.09.

The exchanges were privately negotiated with holders of the convertibles.

In the broader markets, the major equity indexes were lower. The Nasdaq Composite index closed off 46.11 points, or nearly 1%, at 4,848.44. The Dow Jones industrial average closed down 132.86 points, or 0.7%, at 17,732.48 and the S&P 500 stock index shed 17.01 or 0.8%, to 2,079.06.

The Federal Reserve is set to begin its two-day policy meeting on Tuesday. The Fed policy makers are not expected to take any action on rates on Wednesday, but other central banks continue to ease and push yields, lower encouraging buyers of U.S. Treasurys given their relative value.

LinkedIn flat to lower on swap

LinkedIn’s 0.5% convertibles due 2019 jumped on an outright basis on Monday in very active dealings, trading up to 99.25 to 99.5, from 95.25 to 93.5 previously, according to market source.

Shares of the Mountain View, Calif.-based social media company ended up $61.13, or 47%, at $192.21.

For outrights it was a win, a trader said, but for arbs it was a little disappointing.

“You get your money back at par, which is small gain of 50 basis points or so for the last two years,” he said.

Another New York-based trader noted that LinkedIn trading volume was very high as market players were more motivated to sell the LinkedIn paper because the play is over. But a second source said there is still a trade to be played, namely the yield to close versus the equity.

The acquisition is expected to close by the end of the year.

“It’s a little cheaper than the equity, but not by a significant amount,” the trader said.

There were a combination of factors at work on Monday in the trading of this name, the trader said.

“The equity risk arb spread is low. It’s a relatively tight yield for risk arb deals and there wasn’t so much excitement for this one as for higher-yield, juicier names. This is a little more of a boring name,” the trader said.

TiVo Inc. or SanDisk Corp. were examples of higher yielding, juicier plays.

Twitter adds on swap

Twitter’s 0.25% convertibles due 2019 traded up 0.7 point to 89.6 and the Twitter 1% convertibles due 2021 gained 1.3 points to 85.83, according to Trace data.

Twitter shares were up 53 cents, or 3.8%, to $14.55.

The bonds were up about 1.5 points on swap amid renewed speculation that it could be a takeover target, a trader said. But there were no active rumors about potential buyers.

ImmunoGen to price

ImmunoGen, the Waltham, Mass.-based clinical-stage biotechnology company, plans to price $100 million of five-year convertible senior notes after the market close on Tuesday.

The deal was talked to yield 4% to 4.5% with an initial conversion premium of 20% to 25%.

J.P. Morgan Securities LLC is bookrunner for the offering, which has a $15 million greenshoe.

The notes are non-callable with no puts. Upon conversion, holders of the bonds will receive shares of ImmunoGen stock. The notes have takeover and dividend protection.

Proceeds will be used for its operations including but not limited to clinical trial expenditures, including the manufacture of ImmunoGen’s experimental therapies, other research and development expenditures, and other corporate purposes, capital expenditures and for working capital.

ImmunoGen develops targeted cancer therapeutics using its proprietary antibody drug conjugate technology. Its lead product is Mirvetuximab soravtansine, which is being advanced to Phase 3 testing for certain forms of ovarian cancer.

Mentioned in this article:

FireEye Inc. Nasdaq: FEYE

Iconix Brand Group Inc. Nasdaq: ICON

ImmunoGen Inc. Nasdaq: IMGN

LinkedIn Corp. Nasdaq: LNKD

Symantec Corp. Nasdaq: SYMC

Twitter Inc. Nasdaq: TWTR

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