Convertibles primary calendar builds with deals from Clarus, Caliber; Snap skyrockets

By Abigail W. Adams

Portland, Me., Oct. 21 – The convertibles primary market returned to action on Wednesday with two small offerings launching.

Clarus Corp. plans to price $85 million six-year convertible notes on Thursday and Caliber Home Loans Inc. plans to price $100 million three-year par of $50 convertible preferreds on Oct. 28.

Caliber’s offering will have an extended time in the market because it is pricing alongside the company’s IPO.

While primary market activity has been subdued throughout the week, the calendar is expected to pick up in the final week of October, sources said.

Meanwhile, there was an uptick of activity in the secondary space as convertible issuers saw huge movements in their stock price.

There was $598 million in reported volume at the market close, according to a market source.

While equity markets continued to whipsaw surrounding stimulus headlines, earnings-related news was the driving force of trading activity in the secondary space.

Snap Inc.’s convertible notes were in focus in the secondary space with the notes skyrocketing on an outright basis and expanded dollar-neutral on the heels of the company’s third-quarter earnings, which crushed analyst expectations.

Twitter Inc.’s convertible notes also jumped on an outright and dollar-neutral basis as its stock soared on Snap’s coattails.

Redfin Corp.’s 0% convertible notes due 2025 remained active with the notes sinking further below par.

The calendar

Clarus plans to price $85 million of six-year convertible notes on Thursday with price talk for a coupon of 3% to 3.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Jefferies LLC and Stifel, Nicolaus & Co. Inc. are bookrunners for the registered offering, which carries a greenshoe of $12.75 million.

Caliber Home Loans plans to price $100 million three-year par of $50 convertible preferreds on Oct. 28 with price talk for a dividend of 6% to 6.5% and a threshold appreciation price of 17.5% to 22.5%, according to a market source.

The convertible preferreds are pricing alongside Caliber’s initial public offering of 23 million shares, which are talked at a public offering price of $14.00 to $16.00.

Sole stockholder LSF Pickens Holdings LLC, an affiliate of Lone Star, is offering the shares sold in the IPO.

Proceeds from the convertible preferred offering will be used to repurchase shares from LSF Pickens in private transactions.

Snap in focus

Snap’s convertible notes were in focus in the secondary space with the notes skyrocketing on an outright basis and expanded dollar-neutral on the heels of the company’s third-quarter earnings, which crushed analyst expectations.

Both tranches were up more than 30 points outright as stock rocketed more than 30% in intraday activity.

Snap’s 0.25% convertible notes due 2025 traded up 38 points outright.

They were changing hands at 178.375 early in the session, climbed as high as 186 in the early afternoon, but came in alongside stock to trade around 182 heading into the market close.

The bonds saw almost $40 million in reported volume during Wednesday’s session.

Snap’s 0.75% convertible notes due 2026 gained 35 points outright.

They traded at 171.5 early in the session, climbed as high as 183 in intraday activity, and closed the day at 176, sources said.

The 0.75% notes were the second most heavily traded issue of the day with $33 million in reported volume.

Both tranches were expanding on the move up, a source said.

Snap’s stock traded to a low of $34.97 and a high of $38.89 before closing the day at $36.50, an increase of 28.3%.

Stock reached its highest level on Wednesday since the company’s 2017 IPO.

The camera and social media company reported a profit of 1 cent per share versus analyst expectations for a loss per share of 5 cents.

Revenue was $679 million versus analyst expectations for revenue of $557 million.

The company also reported 11 million new daily active users versus analyst expectations for 5 million new daily active users, MarketWatch reported.

While Snap’s 0.25% convertible notes carry a shorter maturity than the 0.75% notes, they are the most recent issue.

Snap tapped the convertible market in April, pricing a $1.15 billion issue of the 0.25% convertible notes following better-than-expected first-quarter earnings.

Twitter expands

Twitter’s convertible notes were also active on Wednesday and making gains on an outright and dollar-neutral basis.

The 1% convertible notes due 2021 traded up to a 101-handle on Wednesday.

They were changing hands at 101.875 in the late afternoon.

The notes move on a light delta and expanded upwards of 1.5 points on the move up, a source said.

While volume was relatively light, Twitter’s 0.25% convertible notes due 2024 gained about 5 points outright.

They expanded 0.5 to 0.75 point dollar-neutral, a source said.

Twitter’s stock traded to a high of $50.52 and a low of $48.85 before closing the day at $50.24, an increase of 8.39%.

Twitter’s stock was riding on Snap’s coattails with Snap’s blockbuster earnings lifting other social media companies.

Redfin down again

Redfin’s recently priced 0% convertible notes due 2025 sank further below par in active trading on Wednesday.

The 0% notes were down 1 point outright to close the session at 98.

However, the notes were largely moving in line dollar-neutral, a source said.

Redfin’s stock traded to a high of $47.40 and a low of $45.09 before closing the day at $45.15, a decrease of 4.67%.

Mentioned in this article:

Clarus Corp. Nasdaq: CLAR

Snap Inc. NYSE: SNAP

Twitter Inc. NYSE: TWTR

Redfin Corp. Nasdaq: RDFN

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