Spire on tap; Peloton ups convertibles to $1 billion, tightens talk; MicroStrategy gains

By Abigail W. Adams

Portland, Me., Feb. 8 – The convertibles primary market launched into action on Monday with two new offerings on deck.

Spire Inc. plans to price $150 million of three-year $50-par equity units after the market close on Tuesday with price talk for a dividend of 7.5% to 8% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

Credit Suisse Securities (USA) LLC, BofA Securities Inc. and Wells Fargo Securities LLC are bookrunners for the registered offering, which carries a greenshoe of $15 million.

In a highly sought-after deal, Peloton Interactive Inc. plans to price a massively upsized $1 billion offering of five-year convertible notes after the market close on Monday.

While some sources did not agree with the assumptions underwriters used, all expect the deal to do well.

Meanwhile, it was a relatively quiet day in the secondary space as equity markets continued their rally.

There was $100 million in reported volume about one hour into the session and $500 million on the tape heading into the market close.

Many were on the sidelines waiting to see what the week will bring for new deal activity, a source said.

MicroStrategy Inc.’s 0.75% convertible notes due 2025 were again in focus with the notes continuing to rip as Bitcoin soared to an all-time high.

SmileDirectClub Inc.’s 0% convertible notes due 2026 improved in active trading their second day in the secondary space.

Peloton in demand

Peloton’s offering of five-year convertible notes played to massive demand during bookbuilding with the notes upsizing by $400 million and already aggressive pricing tightening further.

Peloton plans to price an upsized $1 billion of the five-year notes after the market close with tightened talk for a fixed coupon of 0% and an initial conversion premium of 60% to 65%, according to a market source.

Initial price talk was for a fixed coupon of 0% and an initial conversion premium of 55% to 60%.

The initial size of the offering was $600 million.

The deal was heard to be in the market with assumptions of 200 basis points over Libor and a 45% vol., according to a market source.

Using those assumptions, the deal looked 2.69 points cheap at the midpoint of talk.

However, some accounts felt the credit spread was tight and opted for a spread of 225 bps to 250 bps over Libor, adding “it doesn’t change the equation,” a source said. “It’s a very good bond to own and will do very well.”

One source pegged the credit spread at 275 bps over Libor, which looked to be fair value. “But we all know this is going to trade extremely well, a source said.

Peloton is a large-cap tech company that has become a household name.

MicroStrategy rips

MicroStrategy’s 0.75% convertible notes due 2025 continued to rip on Monday as stock skyrocketed with Bitcoin hitting a new all-time high.

The 0.75% convertible notes rose more than 34 points outright.

They traded up to 254.75 in the late afternoon.

The notes pushed out another 0.5 point dollar-neutral, a source said.

MicroStrategy’s stock traded to a low of $890 and a high of $1,050 before closing the day at $1,041, an increase of 29.16%.

MicroStrategy’s CEO is a Bitcoin bull, and proceeds from its convertible notes offering were used to invest in Bitcoin.

The 0.75% notes have skyrocketed alongside MicroStrategy’s stock and Bitcoin.

The crypto-currency hit an all-time high of $44,762 on Monday after news broke that Tesla Inc. invested $1.5 billion in Bitcoin in January.

Tesla also announced that it may soon accept Bitcoin as a payment option.

SmileDirectClub improves

SmileDirectClub’s 0% convertible notes due 2026 improved in active trading on Monday.

The 0% notes were changing hands at 101.625 early in the session and were wrapped around 101 in the late afternoon.

They expanded about 0.25 point dollar-neutral, a source said.

SmileDirectClub’s stock traded to a high of $12.88 and a low of $12.48 before closing the day at $12.60, an increase of 0.64%.

SmileDirectClub’s convertible notes were volatile on their aftermarket debut last Friday.

The notes traded as high as 103 early in the session but were below par heading into the close.

While volatile on an outright basis, the notes have expanded on a dollar-neutral basis since hitting the aftermarket.

The notes closed last Friday with a 0.25 to 0.5 point expansion, sources said.

Mentioned in this article:

MicroStrategy Inc. Nasdaq: MSTR

Peloton Interactive Inc. Nasdaq: PTON

SmileDirectClub Inc. Nasdaq: SDC

Spire Inc. NYSE: SR

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