Morning Commentary: Desktop Metal convertible notes price; Coinbase bonds ‘destroyed’

By Abigail W. Adams

Portland, Me., May 11 – The convertibles primary market cleared its first new deal since early April after the market close on Tuesday.

However, the new paper was quiet in the secondary space.

Desktop Metal Inc. priced a downsized $100 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 6% and an initial conversion premium of 25%, according to a company news release.

Pricing came in line with widened talk for a coupon of 6% and an initial conversion premium of 25%, according to a market source.

Initial price talk was for a coupon of 5% to 5.5% and an initial conversion premium of 30% to 35%.

The greenshoe was also downsized to $15 million.

The initial size of the offering was $150 million with a greenshoe of $22.5 million.

The deal struggled during bookbuilding with the company a former SPAC whose market cap was destroyed in the market downturn.

However, the deal offered attractive terms.

The new 6% notes were not active in the secondary space early Wednesday with the notes most likely tucked away, sources said.

“They’re for the true believers,” a source said.

Meanwhile, equity indexes were choppy early Wednesday on the heels of the latest Consumer Price Index report.

While April’s inflation rate of 8.3% reflected a month-over-month decrease, the figure was still above expectations for a rate of 8.1%.

Indexes were mixed after wavering between gains and losses early Wednesday.

The Dow Jones industrial average was up 283 points, or 0.86%, the S&P 500 index closed up 0.64%, the Nasdaq Composite index was down 0.27% and the Russell 2000 index was up 0.88% shortly before 11 a.m. ET.

Convertibles issuers continued to see their stock decimated following earnings with Coinbase Global Inc. the latest to join the trend.

Coinbase’s 0.5% convertible notes due 2026 were “destroyed” on an outright basis following earnings, a source said.

The notes sank 10 points outright to change hands at 59 in heavy volume early Wednesday.

However, the notes were moving in line on about a 20% delta, a source said.

The delta the notes were played on largely depended on the holder’s outlook for the company.

Those with a heavier hedge may have fared better.

However, the notes were mostly held by outright accounts.

Coinbase’s stock was changing hands at $55.80, a decrease of 23.54%, shortly before 11 a.m. ET.

Stock tanked after a large earnings miss with the company reporting a loss per share versus analyst expectations for a profit.

Coinbase reported a loss per share of $1.26 versus analyst expectations for earnings per share of 91 cents.

Revenue was $1.17 billion versus analyst expectations for revenue of $1.48 billion.

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