Evolent Health on tap; Twilio convertibles expand on volatility spike; Pandora improves

By Abigail W. Adams

Portland, Me., Oct. 16 – After an active start to the fourth quarter, the convertibles primary market has slowed its pace into the earnings season.

However, new deal activity continues to trickle out with a small offering in the works.

Evolent Health Inc. plans to price $125 million of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 30% to 35%, according to a market source.

J.P. Morgan Securities LLC and Goldman Sachs & Co. are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $18.75 million.

Meanwhile, the secondary space was active amid the rally in equities that was led by the tech sector. The Dow Jones industrial average closed up 547 points.

More than $485 million bonds were on the tape by late afternoon with convertible notes from the tech sector active.

However, Twilio Inc.’s 0.25% convertible notes due 2023 were the focus of trading activity as the software company’s equity saw a steep decline in intraday trading after it announced its acquisition of SendGrind Inc.

The notes were expanding on the spike in vol., a market source said.

Tilray Inc.’s 5% convertible notes due 2023 remained active as the company’s stock saw a volatile session.

The notes were holding their outright level, despite the large swings in stock prices, a market source said.

Pandora Media, Inc.’s 1.75% convertible notes due 2023 were improved on an outright and dollar-neutral basis on Tuesday.

However, stock was trading above the takeover ratio in Sirius XM Holdings Inc.’s bid for the music streaming service, which sources noted as interesting.

Twilio expands

Twilio’s 0.25% convertible notes due 2023 were the focus of trading activity on Tuesday with the notes expanding as stock sank after the company announced an acquisition.

The notes picked up 3 points of vol. on the stock move, a market source said.

With the spike in volatility, the notes expanded between 1.5 points to 3.5 points dollar-neutral from the stock’s peak in September, the source.

The notes were improved about 0.75 point dollar-neutral on Tuesday, another source said.

The notes were seen trading between 116.75 and 118 on an outright basis early in Tuesday’s session.

They changed hands at 123.415 versus a stock price of $73.25 shortly before the market close. More than $29 million bonds were on the tape during Tuesday’s session.

Outright accounts were buying the notes on the dip, a market source said. The 0.25% notes were trading in the 130s in late September.

Twilio stock was down more than 11% early Tuesday but pared its losses to close the day at $75.92, a decrease of 0.28%.

The large drop in stock came after the software company announced it had agreed to acquire e-mail marketing company SendGrind in an all-stock transaction valued at $2 billion.

Tilray volatile

Tilray’s 5% convertible notes due 2023 remained active in the secondary space as the medical cannabis company’s stock saw a volatile session.

The notes gained 5 points outright to trade up to 105 with stock just shy of $180 soon after the opening bell.

However, the notes came in as stock dropped as much as 5% in intraday trading.

The 5% notes were largely holding at 101 despite the large stock swings, a market source said.

They were seen changing hands at 101 with stock as low as $152 and as high as $163.

“That’s pretty cheap,” a market source said. At one point, the notes were trading only a few points above parity.

Tilray stock traded to a high of $178.85 and a low of $151.26 before closing the day at $158.14, a decrease of 4.53%.

The shares of several cannabis companies were down on Tuesday, the day before Canada’s legalization of recreational marijuana goes into effect.

The notes from the medical cannabis company were the focus of trading activity on Monday and broke par after trading as low as 89 amid last week’s sell-off in equities.

Pandora improves

Pandora’s 1.75% convertible notes due 2023 saw a fresh round of trading activity on Tuesday with the notes improved on an outright and dollar-neutral basis.

The 1.75% notes were seen trading at 113.5 versus an equity price of $9.31 in the late afternoon.

They were expanded about 0.25 point to 0.375 point dollar-neutral, a market source said.

More than $10 million of the bonds were on the tape by mid-afternoon.

Pandora stock closed Tuesday at $9.19, an increase of 0.77%.

Stock was trading about 3.5% above the takeover ratio in the pending merger with Sirius XM Holdings, a source said.

Pandora’s convertible notes dropped on both an outright and dollar-neutral basis after the merger with Sirius was announced in late September.

Pandora has the ability to solicit and negotiate a competing acquisition proposal until Oct. 24. There has been speculation a competitor may offer a higher price.

Mentioned in this article:

Evolent Health Inc. NYSE: EVH

Pandora Media, Inc. NYSE: P

Tilray Inc. Nasdaq: TLRY

Twilio Inc. NYSE: TWLO

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