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Morning Commentary: Intercept convertible notes hit the market, expand; Zillow active
By Abigail W. Adams
Portland, Me., May 10 – After a sluggish week, the convertibles secondary market saw an uptick of activity as new paper entered the space.
Intercept Pharmaceuticals Inc. priced $200 million of seven-year convertible notes prior to the market open on Friday at par with a coupon of 2% and an initial conversion premium of 30%.
Pricing came at the cheap end of talk for a coupon of 1.5% to 2% and an initial conversion premium of 30% to 35%, according to a market source.
The notes priced concurrently with a $200.4 million, or 2.4 million share, offering of common stock, which priced at $83.50 a share.
The new paper was in focus in the secondary space and expanding on debut. “They were trading up right out of the gate,” a market source said.
The 2% convertible notes were changing hands at 103 versus a stock price of $86.00, a market source said. They were seen changing hands at 102.5 a short time later as stock came in.
Intercept stock was $85.78, an increase of 2.24%, shortly before 11 a.m. ET.
More than $37 million of the bonds were on the tape less than one hour into Friday’s session.
Outside of the new paper, Zillow Group Inc.’s 2% convertible notes due 2021 saw high-volume activity following a large earnings beat.
The 2% convertible notes were changing hands at 105.125 early in the session with $18 million of the bonds on the tape.
Zillow stock was $37.55, an increase of 9.57%, shortly before 11 a.m. ET.
Zillow reported losses per share of 33 cents for the first quarter versus analyst expectations for losses per share of 34 cents.
Revenue was $454.1 million, which far exceeded analyst expectations for revenue of $432.1 million.
Zillow also reported an increase in revenue from its home-buying programing, which it intends to expand to several additional U.S. cities.
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