Exact Sciences brings overnight deal; convertibles secondary market weak; Tesla active

By Abigail W. Adams

Portland, Me., Feb. 24 – While Monday was a brutal day for equities, it did not stop the convertible primary market from rolling out a new offering.

In an overnight deal, Exact Sciences Corp. plans to price $850 million of eight-year convertible notes after the market close on Monday.

The deal looked several points cheap based on underwriters’ assumptions, sources said.

Meanwhile, the convertibles secondary space launched the week in the red as volatility rocked equities on renewed concern over the coronavirus and its impact on global growth.

“There’s some serious carnage going on,” a market source said.

The Dow Jones industrial average, S&P 500 index and Nasdaq composite all closed the day down more than 3%.

Outright and hedge investors were feeling the pain with the convertible secondary space in about 0.25 to 0.375 point on a dollar-neutral basis, a market source said.

However, the secondary space was quiet with market players largely on the sideline as the sell-off in equities intensified.

There was about $340 million in reported volume heading into the late afternoon with few names seeing concentrated trading activity.

“Everyone’s working on their hedges,” a market source said.

The deals to price over the past two weeks were weaker on Monday while in-the-money names were unchanged to slightly improved, another source said.

Tesla Inc.’s convertible bonds were among the major volume movers in the secondary space although the notes were largely unchanged.

Pegasystems Inc.’s recently priced 0.75% convertible notes due 2025 remained active and were down on an outright and dollar-neutral basis.

Integra Lifesciences Holdings Corp.’s 0.5% convertible notes due 2025 gave back most of last week’s post-earnings gains and were again weak on both an outright and dollar-neutral basis.

Palo Alto Networks Inc.’s 0.75% convertible notes due 2023 were active and trading off in the run up to the cybersecurity company’s earnings report.

Exact Sciences overnight

In an overnight deal, Exact Sciences plans to price $850 million of eight-year convertible notes after the market close on Monday with price talk for an offer price of par, a fixed coupon of 0.375% and a fixed initial conversion premium of 27.5%, according to a market source.

The deal was heard to be in the market with assumptions of a credit spread of 300 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal modeled almost 5 points cheap, a source said.

Sources were surprised to see the deal, given the sell-off in equities.

It is also rare to see such a large deal come as a registered offering, a source said.

However, the deal was most likely pre-marketed, sources said.

Tesla active

Tesla’s convertible bonds were among the few issues to see concentrated trading activity on Monday.

While the bonds were down outright as stock dropped as much as 8% in intraday trading, they were moving in line dollar-neutral, a market source said.

The 2% convertible notes due 2024 were down almost 19 points outright.

They were changing hands around 279.75 in the late afternoon with more than $18 million in reported volume.

The 2% notes topped triple par last week as stock shot past $900.

Tesla’s 1.25% convertible notes due 2021 dropped more than 10 points outright to 239 with more than $8 million in reported volume.

Tesla’s stock traded to a low of $822.20 and a high of $863.50 before closing the day at $833.79, a decrease of 7.46%.

Pegasystems comes in

Pegasystems recently priced 0.75% convertible notes due 2025 remained active in the secondary space although the notes were giving back much of their gains.

The notes were down 1 point outright to 101.625 in the late afternoon. They were contracting about 0.25 point dollar-neutral, a market source said.

Pegasystems stock traded to a low of $93.42 and a high of $97.16 before closing the day at $96.01, a decrease of 3.09%.

The notes traded north of 104 and were expanded 2.5 points dollar-neutral on their secondary market debut last Thursday.

However, they have been coming in since as its stock slumps alongside the broader market.

Integra comes in

Integra Lifesciences’ 0.5% convertible notes due 2025 gave back much of the gains seen after reporting earnings last week.

While volume was light, the 0.5% notes were down about 1.75 points outright to 101.75. There was about $4 million in reported volume.

They were also coming in on a dollar-neutral basis, a market source said.

Integra stock traded to a low of $55.92 and a high of $58.87 before closing the day at $58.64, a decrease of 1.06%.

The 0.5% notes traded north of 105 after the medical technology company reported a fourth-quarter earnings beat late last week.

Palo Alto active

Palo Alto’s 0.75% convertible notes due 2023 were active in the run up to the company’s earnings report, which is slated for after the market close on Monday.

The 0.75% notes were down 1.375 points outright. They were changing hands at 111.436 versus a stock price of $236.65, according to a market source.

With $9 million in reported volume by the late afternoon, the notes were among the most active in the secondary space.

Palo Alto stock traded to a low of $231.28 and a high of $237.94 before closing the day at $237.33, a decrease of 2.33%.

Mentioned in this article:

Exact Sciences Corp. Nasdaq: EXAS

Integra Lifesciences Holdings Corp. Nasdaq: IART

Pegasystems Inc. Nasdaq: PEGA

Palo Alto Networks Inc. NYSE: PANW

Tesla Inc. Nasdaq: TSLA

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.