Convertibles calendar balloons; DexCom, Liberty Media, Electronics for Imaging on tap

By Abigail W. Adams

Portland, Me., Nov. 26 – The convertibles primary market whipped into action on Monday with equities rebounding after a brutal sell-off over the past few weeks stifled new deal activity.

DexCom Inc., Liberty Media Corp. and Electronics for Imaging Inc. are all on tap with convertible notes offerings set to price after the market close on Tuesday.

The markets showed signs of a rebound on Monday with the Dow Jones industrial average ending the day up 354.29 points.

However, the convertibles secondary space saw light trading volume with convertible bonds slow to trade despite some large movements in stock.

Western Digital Corp.’s 1.5% convertible notes due 2024 were again major volume movers in the secondary space although the notes saw little movement in price.

Soon to mature convertible notes from Akamai Technologies Inc. and Altaba Inc. also saw some trading activity.

While Twilio Inc.’s and Zillow Group Inc.’s stock jumped during Monday’s session, their convertible bonds were slow to trade.

However, Twilio’s 0.25% convertible notes due 2023 saw large gains on an outright basis in the light trading volume.

The forward calendar

After a lull in primary market activity, the calendar ballooned on Monday with three deals launching as equity markets showed signs of a rebound.

DexCom plans to price $750 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.25% to 0.75% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

J.P. Morgan Securities LLC, BofA Merrill Lynch and Leerink Partners LLC are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $100 million.

Electronics For Imaging plans to sell $130 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 30% to 35%, according to a market source.

Goldman Sachs & Co. and Citigroup Global Markets Inc. are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $19.5 million.

Liberty Media plans to price $350 million of exchangeable debentures due 2048 after the market close on Tuesday with price talk for a coupon of 1.25% to 1.75% and an initial exchange premium of 27.5% to 32.5%, according to a market source.

UBS Securities LLC, Citigroup, Credit Suisse Securities (USA) LLC, Mizuho Securities USA Inc. and Morgan Stanley & Co. LLC are joint bookrunners for the Rule 144A offering, which carries a greenshoe of $52.5 million.

Shares of Live Nation Entertainment, Inc. are the reference securities for the exchangeables.

Liberty may deliver series C Liberty Formula One common stock, series C Liberty Sirius XM common stock, or any other class of Liberty’s publicly traded common stock that meets certain criteria upon an exchange.

Western Digital active

Western Digital’s 1.5% convertible notes due 2024 remained the volume leader in the secondary space although with little substantial change to price, sources said.

The 1.5% convertible notes changed hands just north of 83.75 with more than $10 million of the bonds in play early in the session, a market source said.

While large amounts of the bonds traded, there were only a few trades on the tape.

The notes were largely flat on an outright basis.

Western Digital stock traded up to $48.50 at the market’s open but quickly came in and closed the day at $47.92, an increase of 1.23%.

The notes have been major volume movers in the secondary space over the past two weeks.

Sources attributed the recent trading activity to the notes being dropped from the Thomson Reuters Convertibles Indices on Nov. 14.

Prior to being dropped from the indices, the notes were active with Western Digital stock under pressure after the data storage company reported third-quarter earnings.

Western Digital stock was $87.08 when the company priced the $1.1 billion issue on Jan. 30, 2018.

Maturing notes

Akamai Technologies’ 0% convertible notes due Feb. 15, 2019 saw some action in the secondary space on Monday with the notes’ maturity approaching.

The notes were changing hands at 99.25 with about $6 million on the tape late in the session.

The trades were most likely cash alternative trades, a market source said. There is little chance the notes will be convertible prior to their maturity.

While less active, Akamai’s 0.125% convertible notes due 2025 were also on the tape. The 0.125% notes were changing hands at 95.125 on an outright basis.

Akamai stock closed Monday at $68.40, an increase of 0.90%.

Altaba’s 0% convertible notes due Dec. 1, 2018 also saw some trades on the tape. The notes were continuing to trade at parity at 115.41, a market source said.

Altaba stock closed Monday at $64.37, an increase of 3.16%.

Stock moves

While their convertible notes were slow to trade, the equities of some issuers saw large gains as equity markets improved.

Twilio’s 0.25% convertible notes due 2023 jumped 13 points outright to change hands at 139.75. Twilio stock jumped as high as $88.88 in intraday trading and closed Monday at $87.41, an increase of 8.42%.

Zillow’s 1.5% convertible notes due 2023 gained 2.25 points outright to trade just shy of 87.5. The stock closed Monday at $32.89, an increase of 11.91%.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

Altaba Inc. Nasdaq: AABA

DexCom Inc. Nasdaq: DXCM

Electronics for Imaging Inc. Nasdaq: EFII

Live Nation Entertainment, Inc. NYSE: LYV

Twilio Inc. NYSE: TWLO

Western Digital Corp. Nasdaq: WDC

Zillow Group Inc. Nasdaq: Z

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