Merit Medical on deck; Evergy eyed; Uber hits new heights; MicroStrategy explodes

By Abigail W. Adams

Portland, Me., Dec. 4 – The convertibles primary market launched what is expected to be a busy week of issuance with two sizable offerings on deck.

Merit Medical Systems Inc. plans to price $550 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

J.P. Morgan Securities LLC (lead left), Piper Sandler Co. and Wells Fargo Securities LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $82.5 million.

Evergy Inc. plans to price $1.1 billion of four-year convertible notes after the market close on Monday.

The deal is the latest in what has become a well-established trend in 2023 – investment-grade utility companies tapping the convertible market to refinance straight debt.

However, it played to solid demand with the deal modeling cheap and books closing in the early afternoon.

The deal launched on a soft day for markets with equities and Treasuries weak after closing the previous week with strong gains.

Indexes were mixed with small caps continuing to outperform after an almost 3% gain the previous session.

The Dow Jones industrial average closed Monday down 41 points, or 0.11%, the S&P 500 index closed down 0.54%, the Nasdaq Composite index closed down 0.84% and the Russell 2000 index closed up 1.04%.

There was $104 million in reported volume about one hour into the session and $356 million on the tape about one hour before the market close.

PG&E Corp.’s new 4.25% convertible notes due 2027 continued to dominate the tape although with little movement in price.

However, Uber Technologies Inc.’s recently priced 0.875% convertible notes due 2028 continued their climb with the notes hitting a new outright height in heavy volume on Monday.

MicroStrategy Inc.’s 0.75% convertible notes due 2025 exploded on an outright and dollar-neutral basis as Bitcoin rallied.

Evergy eyed

Evergy plans to price $1.1 billion of four-year convertible notes after the market close on Monday with price talk for a coupon of 4.25% to 4.75% and an initial conversion premium of 22.5% to 27.5%.

The deal was heard to be in the market with assumptions of 150 basis points over SOFR and a 19% vol.

Using those assumptions, the deal looked about 2.25 points cheap at the midpoint of talk, a source said.

The deal is the latest in what has become a well-established trend in 2023 – investment-grade utility companies tapping the convertible market to refinance straight debt.

While the low vol., short-duration notes did not spark much enthusiasm from some sources, the deal was heard to have played to strong demand with books closing in the early afternoon.

Pricing was believed to be coming at the mid to rich end of coupon talk and the cheap end of premium talk.

PG&E active

PG&E’s new 4.25% convertible notes due 2027, the largest deal to price in 2023, continued to dominate the tape on Monday although with little movement in price.

The notes were trading at 102 versus a stock price of $17.44 early in the session, according to a market source.

They were changing hands at 102.125 versus a stock price of $17.50 in the late afternoon.

There was $20 million in reported volume.

PG&E’s stock traded to a low of $17.24 and a high of $17.59 before closing at $17.27, down 1.03%

Uber’s new heights

Uber’s recently priced 0.875% convertible notes due 2028 continued their climb in heavy volume on Monday with the notes hitting their highest outright levels since pricing.

The 0.875% notes jumped 2.5 points outright with stock up more than 4% in intraday activity.

The notes were seen at 107.25 versus a stock price of $60.26 in the late afternoon.

There was $15 million in reported volume.

Uber’s stock traded to a high of $60.92 and a low of $58.57 before closing at $58.63, up 2.23%.

Uber’s stock jumped on Monday following news the company would be joining the S&P 500 index on Dec. 18.

MicroStrategy explodes

MicroStrategy’s 0.75% convertible notes due 2025 jumped double digits outright and made strong gains on hedge on Monday as Bitcoin surged past a key resistance level.

The 0.75% notes jumped 11 points outright with stock up more than 7%.

They were wrapped around 151 in the late afternoon.

There was $18 million in reported volume.

MicroStrategy’s stock traded to a low of $550 and a high of $577.77 before closing at $563.22, up 6.74%.

The business intelligence company that has invested heavily in Bitcoin surged as Bitcoin surpassed a key resistance level.

Bitcoin blew past $40,000 on Monday and was trading at $42,154.

The surge was sparked by chatter that the Securities and Exchange Commission is set to approve several pending ETF Bitcoin applications in early January.

Mentioned in this article:

Evergy Inc. Nasdaq: EVRG

Merit Medical Systems Inc. Nasdaq: MMSI

MicroStrategy Inc. Nasdaq: MSTR

PG&E Corp. NYSE: PCG

Uber Technologies Inc. NYSE: UBER

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