Wix.com prices, trades up in high-volume; Red Hat active post earnings; Wright Medical holds

By Abigail W. Adams

Portland, Me., June 22 – New paper from Wix.com Ltd. was in focus on Friday with the notes in demand during book building and in the secondary market.

The new 0% convertible notes due 2023 dominated trading activity in the secondary space with the notes expanding on debut.

Trading volume was light outside of the new paper from Wix.com, which is to be expected with the summer season setting in, sources said.

Activity surrounding new paper from Wright Medical Group NV, Redwood Trust Inc. and QTS Realty Trust Inc. settled with the trading light to non-existent.

While not seen on the tape on Friday, Wright Medical Group’s new 1.625% convertible notes due 2023 closed Thursday at 101.

The part-new issue, part-exchange was “a good transaction” that was heavily allocated to fundamental long-only investors, a market source said.

Outside of the new deals, Red Hat Inc.’s 0.25% convertible notes due 2019 were active and dropping alongside the stock after the company reported first-quarter earnings with lower than expected guidance.

Wix.com in demand

Wix.com priced an upsized $385 million of five-year convertible notes after the market close on Thursday at the rich end of talk with a coupon of 0% and an initial conversion premium of 35%.

Price talk had been for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%.

The deal was increased from $350 million. The greenshoe was also increased to $57.8 million from $52.5 million.

The notes “traded right up,” a market source said. “They were well priced to go out the door.”

The notes were seen trading as high as 103 with stock up early in the session but dropped down to the 101 level as stock dropped off about 1%.

The notes were holding at 101¾ with the stock down, a market source said.

They were seen trading later in the afternoon between par ¼ and par 5/8 and expanded about 2 points dollar-neutral, sources said.

Wix.com stock closed Friday at $101.95, a decrease of 3.5%.

The new 0% notes dominated trading activity in the secondary space, accounting for almost half of the trading volume during Friday’s session.

The notes “came out of the gate quickly” with more than $67 million in trading volume early in the session, sources said.

They remained active throughout the day with more than $138 million on the tape by late afternoon.

The 0% notes also accounted for about a third of the number of trades on the tape. Of the 387 trades that took place by late afternoon, 140 were of Wix’s new paper.

New paper

As the focus shifted to Wix.com’s 0% convertible notes due 2023, the three deals that hit the market on Thursday were slow to trade.

Redwood Trust’s 5.125% convertible notes due 2024 were not seen on the tape on Friday. The notes closed Thursday at 98.875, below their 99.5 issue price.

Trading of QTS Realty’s 6.5% series B cumulative convertible perpetual preferred stock also tempered on Friday.

After closing Thursday at par, the convertible preferreds were up about 0.25 point on an outright basis to close Friday at 100.25. QTS common stock closed Friday at $39.75, an increase of 0.89%.

Wright holds

Wright Medical Group’s new 1.625% convertible notes due 2023 were also not seen on the tape on Friday.

However, the notes were active on Thursday after pricing prior to the market open and they closed that day at 101.

The part-new issue, part-exchange was “a good transaction” that was heavily allocated to fundamental long-only investors, a market source said.

The deal was primarily a “liability management exercise,” the source said.

With $587 million coming due in two-years, the new deal was an opportunity for the company to extend the maturity to five years while reducing the coupon and increasing the conversion price.

Holders of Wright Medical Group’s 2% cash convertible senior notes due 2020 entered into privately negotiated agreements to exchange $401 million of the 2% notes for $460 million of the 1.625% notes.

The company will deliver $1,146.10 of new notes for each $1,000 principal amount of the 2% notes in the exchange.

The exchange was done with holders that were long-time investors in the company. The deal was also an opportunity for holders to extend their investment horizon, the source said.

Red Hat active

Red Hat’s 0.25% convertible notes due 2019 were the second most active of the day on Friday although trading was dwarfed by comparison to Wix.com.

The notes were down more than 31 points on an outright basis although they continued to trade at parity and were moving in lock step with the stock, sources said.

The notes were seen trading at 197 versus an equity price of $144.92.

With $10 million on the tape by late afternoon, Red Hat’s 0.25% convertible notes were the most heavily traded issue outside of Wix.com.

Red Hat stock closed Friday at $142.14, a decrease of 14.23%.

The drop in the stock came after the company reported first quarter earnings.

While Red Hat topped analyst expectations with non-GAAP earnings per share of 72 cents, the company’s second-quarter guidance of earnings-per-share of 81 cents missed analyst expectations of 89 cents.

Mentioned in this article:

Red Hat Inc. NYSE: RHT

Redwood Trust Inc. NYSE: RWT

QTS Realty Trust Inc. NYSE: QTS

Wix.com Ltd. Nasdaq: WIX

Wright Medical Group NV Nasdaq: WMGI

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