Midday Commentary: Yahoo! upsized $1.25 billion convertibles slip in early trade; WebMD prices

By Rebecca Melvin

New York, Nov. 21 - Yahoo! Inc.'s newly priced 0% convertibles slipped in early trade Thursday after the Sunnyvale, Calif.-based internet search, content and communications company priced an upsized $1.25 billion of the five-year notes at the rich end of talked terms.

Yahoo!'s 0% notes traded up out of the chute at 100.375 bid, 100.5 offered, but they broke par in the early going, a New York-based sellsider said. He said they slipped to as low as 99 bid, 99.25 versus a share price of $35.62.

A second New York-based source said the level at late morning was 99.75 bid, 100 offered versus a share price of $36.40.

Shares were up by better than 2% against the $35.62 share price at issue.

The weaker performance of the new Yahoo! deal was in line with a trend this past week of new issues hovering around par or slipping after release for secondary dealings and in contrast to 2- to 3-point climbs for the debuts of most new convertibles issues recently.

"They upsized it and it was already modeling rich, so people were skittish. If this had come at a 1% coupon, up 50%, I think it could have done well, but at 0%, up 50%, I can see why this would happen," the New York-based sellsider said.

Also in the primary market, WebMD Health Corp. priced $300 million of 1.5% convertibles due 2020 in an overnight deal. But the new notes of the Elmwood Park, N.J.-based provider of health information services were not yet heard in trade after pricing at the talked, fixed price points early Thursday.

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