Redfin convertible notes hit aftermarket, expand on debut; Zogenix gains; Splunk active

By Abigail W. Adams

Portland, Me., Oct. 16 – New paper was in focus in the convertibles secondary space on Friday after the primary market priced the last new deal of the week.

Redfin Corp. priced an upsized $575 million of five-year convertible notes after the market close on Thursday.

The deal was in demand during bookbuilding and saw a large dollar-neutral expansion on its secondary market debut.

Outside of the new paper, volume was relatively light.

Splunk Inc.’s convertible notes were again active with the notes gaining on an outright basis as stock recovered from a sell-off earlier in the week.

Zogenix Inc.’s 2.75% convertible notes due 2027 were posting gains on an outright and dollar-neutral basis after the biopharmaceutical company received positive news about a product in development.

Redfin expands

Redfin priced an upsized $575 million of five-year convertible notes after the market close on Thursday at par with a coupon of 0% and an initial conversion premium of 40%.

Pricing came in line with revised talk for a fixed coupon of 0% and at the rich end of revised talk for an initial conversion premium of 37.5% to 40%.

Initial talk was for a coupon of 0% to 0.5% and an initial conversion premium of 32.5% to 37.5%.

The greenshoe was also upsized to $86.25.

The initial size of the offering was $525 million with a greenshoe of $78.75 million.

The 0% notes dominated trading activity in the secondary space and skyrocketed on debut.

They were marked at 102.5 bid, 103 offered early in the session and were expanded upwards of 3.125 points dollar-neutral, a source said.

While the notes came in on an outright basis as stock traded down to the lows of the day, they maintained their large dollar-neutral expansion.

The notes were marked at 101 bid, 101.5 offered in the late afternoon.

They were still expanded about 3 points dollar-neutral.

Redfin’s stock traded to a high of $51.74 and a low of $48.28 before closing the day at $48.40, a decrease of 6.55%.

Concurrently with the convertible notes offering, Redfin repurchased $116.9 million of its 1.75% convertible notes due 2023 for $107.4 million in cash and 2.1 million shares of common stock.

Splunk active

Splunk’s convertible notes were again active as stock recovered from a sell-off earlier in the week.

The 1.125% convertible notes were up about 1.75 points outright with stock up almost 2%.

The notes were changing hands at 154.5 versus an equity price of $208.92 in the late afternoon.

The bonds saw more than $26 million in reported volume in the late afternoon.

Splunk’s 0.5% convertible notes due 2023 were up 2 points outright.

They were changing hands at 149.5 versus a stock price of $208.70.

The bonds saw about $5 million in reported volume.

Splunk’s stock traded to a high of $210.90 and a low of $206.73 before closing the day at $207.20, an increase of 0.93%.

The software company’s convertible notes were active earlier in the week as stock sold off following an analyst downgrade.

UBS downgraded the company to “Sell” from “Buy” and reduced its price target for stock to $165 from $242.

Zogenix gains

Zogenix’s 2.75% convertible notes due 2027 were posting gains on an outright and dollar-neutral basis following positive news for the company.

The 2.75% notes rose almost 3 points outright with stock up more than 4%.

They traded as high as 108.5 in the late afternoon.

The notes expanded about 0.75 point dollar-neutral, a market source said.

There was almost $10 million in reported volume during Friday’s session.

Zogenix’s stock traded to a high of $20.65 and a low of $19.52 before closing the day at $20.40, an increase of 3.98%.

Stock was on the rise after the biopharmaceutical company announced that it had received a positive opinion from the European Medicines Agency about marketing approval for the company’s treatment for epilepsy in children.

Mentioned in this article:

Redfin Corp. Nasdaq: RDFN

Splunk Inc. Nasdaq: SPLK

Zogenix Inc. Nasdaq: ZGNX

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