NextEra on tap; Medallia, Shopify convertible offerings eyed; Canadian Solar gains

By Abigail W. Adams

Portland, Me., Sept. 15 – The convertibles primary market returned to action on Tuesday with three overnight offerings totaling $3.3 billion on deck.

NextEra Energy Inc. plans to price $2 billion of three-year $50-par equity units prior to the market open on Wednesday with price talk for a reoffer price of $48.75 to $49, a fixed dividend of 6.219% and a fixed threshold appreciation premium of 25%, according to a market source.

Barclays and BofA Securities Inc. are joint bookrunners for the registered offering.

Medallia Inc. plans to price $500 million of five-year convertible notes and Shopify Inc. plans to price $800 million of five-year convertible notes after the market close on Tuesday.

The deals looked cheap to fair value based on underwriters’ assumptions, sources said.

They were heard to be in demand with Shopify upsizing.

Meanwhile, the secondary space remained firm with trading volume decent as market players eyed the new deals on deck.

Canadian Solar Inc.’s recently priced 2.5% convertible notes due 2025 were active with the notes gaining on an outright and dollar-neutral basis as stock continued its upward momentum.

Medallia on deck

Medallia plans to price $500 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.125% to 0.625% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The deal was being marketed with assumptions of 450 basis points over Libor and a 40% vol.

Using those assumptions, the deal looked 1.5 points cheap at the midpoint of talk.

Another source saw the deal almost 3 points cheap.

The pricing for the offering from the San Francisco-based customer feedback management software developer was decent and consistent with the market, a source said.

Shopify on tap

Shopify plans to price $800 million of five-year convertible notes after the market close on Tuesday with price talk for a fixed coupon of 0.125% and an initial conversion premium of 52.5% to 57.5%, according to a market source.

Concurrently with the convertible notes offering, the company plans to price a secondary offering of $1.1 billion class A subordinate voting shares.

The deal was being marketed with assumptions of 225 bps over Libor and a 40% vol., sources said.

Using those assumptions, one source saw the deal as 0.79 point cheap at the midpoint of talk.

However, another source saw the deal as 2.6 points cheap.

Underwriters were being conservative with Shopify’s credit assumptions with the large cap company actually turning a profit, one source said.

The Ottawa-based global ecommerce company has a huge market cap of $113 billion and stock has “gone straight up” over the past five years, another source said.

However, given the outcome of RingCentral Inc.’s recently priced 0% convertible notes due 2026, which were changing hands at 97 on Monday, “I’d be fearful to get too aggressive [on Shopify],” the source said.

Other sources were less than enamored with the offering.

The terms of the deal imply such low rates for any time horizon “I have trouble just thinking about it,” another source said.

While sources diverged on the attractiveness of the offering, it was heard to be in demand during bookbuilding.

The deal was heard to have upsized and was believed to be pricing at or through the rich end of talk, a source said.

The fact the deal was registered also helped stoke demand with the investor base larger than if it were a Rule 144A offering, a source said.

Canadian Solar improves

Canadian Solar’s recently priced 2.5% convertible notes due 2025 continued to rise on an outright and dollar-neutral basis on Tuesday as stock soared.

The notes rose 4 points outright with stock up more than 5% in intraday activity.

They were seen changing hands at 111.125 in the late afternoon, according to a market source.

They were up another 0.25 point dollar-neutral.

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

Canadian Solar stock traded to a high of $32.23 and a low of $30.53 before closing the day at $31.27, an increase of 3.75%.

Stock has been on the rise since the 2.5% notes made their aftermarket debut last Friday.

The notes have seen large gains on an outright and dollar-neutral basis.

Mentioned in this article:

Canadian Solar Inc. Nasdaq: CSIQ

Medallia Inc. NYSE: MDLA

NextEra Energy Inc. NYSE: NEE

RingCentral Inc. NYSE: RNG

Shopify Inc. NYSE: SHOP

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