Uber’s upsized convertible notes price, expand on trading debut; Western Digital active

By Abigail W. Adams

Portland, Me., Nov. 21 – The convertibles primary market was quiet on Tuesday after pricing the largest deal of the month.

In a deal that played to heavy demand, Uber Technologies Inc. priced an upsized $1.5 billion of five-year convertible notes after the market close on Monday.

The offering “was a good showing,” a source said.

While no further activity is expected during the holiday truncated week, the primary market is expected to see an active end to the year with demand for new paper strong and refinancing needs mounting.

Meanwhile, it was an active day in the convertibles secondary space as Uber’s new paper made its aftermarket debut.

Equity indexes were in the red on Tuesday with the Dow Jones industrial average closing the day down 63 points, or 0.18%, the S&P 500 index down 0.20%, the Nasdaq Composite index down 0.59% and the Russell 2000 index down 1.32%.

However, the demand seen during book building followed the notes into the secondary space, with the notes making strong gains on an outright and dollar-neutral basis on debut.

The market was largely quiet outside of Uber, whose two tranches accounted for about one-half of the $641 million in reported trading volume in the late afternoon.

While Uber’s new notes posted gains, the ride-sharing technology company’s 0% convertible notes due 2025 remained weak.

Separately, Western Digital Corp.’s recently priced 3% convertible notes due 2028 were active with the notes coming in alongside stock.

Uber in demand

In a deal that played to heavy demand, Uber sold an upsized $1.5 billion of five-year convertible notes after the market close on Monday at par with a coupon of 0.875% and an initial conversion premium of 32.5%.

Pricing came at the midpoint of revised talk for a coupon of 0.75% to 1% and in line with revised talk for an initial conversion premium of 32.5%.

Initial price talk was for a coupon of 0.75% to 1.25% and an initial conversion premium of 27.5% to 32.5%.

The greenshoe was also upsized to $225 million.

The initial size of the offering was $1.2 billion with a greenshoe of $180 million.

Allocations were described as a ‘food fight,’ with the deal modeling cheap and market players bullish on the name.

The strong demand for the notes followed them into the secondary space, with the notes making gains on an outright and dollar-neutral basis on debut.

While the notes briefly traded below par with stock down pre-open, they quickly recovered and jumped to a 101 handle early in the session.

The notes were trading in the 101.375 to 101.625 context about one hour after the opening bell. They were seen changing hands at 101.125 versus a stock price of $54.88 in the late afternoon.

The 0.875% notes expanded 0.75 point to 1 dollar-neutral, sources said.

The notes dominated activity in the secondary space with $267 million in reported volume.

“This was a good showing,” a source said. “It was good for the market.”

While Uber’s new notes were strong, its 0% convertible notes due 2025 remained weak after a 1 point contraction the previous session.

The notes were off about 0.25 point outright.

The convertibles were trading at 97 versus a stock price of $54.87 in the late afternoon.

There was $38 million in reported volume.

While the 0% convertible notes were soft on the heels of the latest offering, the weakness in the notes was “just noise,” a source said.

With the market bullish on Uber, they are expected to recover.

Uber’s stock traded to a low of $53.89 and a high of $55.08 before closing at $54.85, up 0.18%.

Western Digital active

Western Digital’s recently priced 3% convertible notes due 2028 were active on Tuesday with the notes coming in alongside stock.

The 3% notes were off about 1.5 points outright with stock down about 2.5%.

They were changing hands at 110.875 versus a stock price of $46.24 in the late afternoon, according to a market source.

There was $14 million in reported volume.

Western Digital’s stock traded to a low of $46.11 and a high of $47.04 before closing at $46.24, off 2.34%.

Western Digital priced a $1.6 billion issue of the 3% convertible notes at par on Oct. 31.

The notes have made strong outright and dollar-neutral gains since pricing.

Mentioned in this article:

Uber Technologies Inc. NYSE: UBER

Western Digital Corp. Nasdaq: WDC

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