Spire on deck; Peloton convertible notes in focus, surge on debut; Tilray, Shopify eyed

By Abigail W. Adams

Portland, Me., Feb. 9 – While no deals were announced on Tuesday, the convertibles primary market had one new offering in the works, which is slated to price after the market close.

Spire Inc. plans to price $150 million three-year $50-par equity units after the market close on Tuesday.

The deal looked cheap based on underwriters’ assumptions and was priced attractively, sources said. However, the small offering is expected to have a limited audience.

Peloton Interactive Inc. was the name of the day on Tuesday after the New York-based exercise and media company priced an upsized $875 million offering of five-year convertible notes.

The demand seen during bookbuilding followed the notes into the secondary space where they exploded on debut.

Outside of the new paper, the secondary space was active as the equity of convertible issuers continued to see outsized moves.

There was more than $1 billion on the tape at the market close, according to a market source.

Shopify Inc.’s 0.125% convertible notes due 2025 were active as stock broke out to a new 52-week high. However, the notes were largely unchanged on a dollar-neutral, or hedged, basis, a source said.

While volume was light, Tilray Inc.’s 5% convertible notes due 2023 continued to gain as stock shot up more than 40%.

Peloton in focus

Peloton priced an upsized $875 million offering of five-year convertible notes after the market close on Monday at par with a coupon of 0% and an initial conversion premium of 65%.

Pricing came in line with tightened talk for a fixed coupon of 0% and at the rich end of talk for an initial conversion premium of 60% to 65%.

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 $650 million.

The deal played to massive demand during bookbuilding with the demand following it into the secondary space.

The 0% notes exploded out of the gate.

They traded as high as 106 and were up 5.5 points on a dollar-neutral, or hedged, basis early in the session, according to a market source.

“The price is spinning out of control,” a source said.

The notes continued to trade on a 106-handle as the session progressed.

They were seen changing hands at 106.25 versus a stock price of $149 in the late afternoon and remained expanded by 5.5 points, sources said.

The notes dominated activity in the secondary space with more than $400 million in estimated volume.

Peloton’s stock traded to a high of $149.92 and a low of $145.10 before closing the day at $147.76, an increase of 1.91%.

Spire on deck

Spire plans to price $150 million 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.

The deal was heard to be marketed with assumptions of 150 basis points over Libor and a 29.5% to 26.5% vol. skew, a source said.

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

The deal looked reasonable and the natural gas distribution company was a solid credit, another source said.

“You don’t see a lot of 7.75%, up 20% mandys these days,” a source said.

However, the small offering is expected to have a limited audience.

Tilray gains

Tilray’s 5% convertible notes due 2023 continued their upward momentum on Tuesday as stock shot up more than 40%.

The 5% convertible notes traded up more than 3 points outright to 93.5 in the late afternoon.

The notes were down in the low 20s last July, a source said.

“They’ve had quite the comeback,” another source said.

While Tilray’s stock jumped more than 40% on Tuesday, the notes largely trade for their yield, which was about 7.75%.

Tilray’s stock traded to a low of $34.26 and a high of $45.49 before closing the day at $42.35, an increase of 40.74%.

Stock skyrocketed on Tuesday after Virginia became the latest state to legalize adult recreational marijuana use.

Tilray also announced a new distribution agreement in the U.K. for the company’s medical cannabis products and recently announced its first medical cannabis shipment to Spain, the Motley Fool reported.

Shopify active

Shopify’s 0.125% convertible notes due 2025 were active and reached their highest outright level since pricing as stock broke out to a new 52-week high on Tuesday.

The 0.125% notes gained 5 points outright with stock up more than 6%.

The notes traded up to 134.375 in the late afternoon, the highest outright level for the notes since they priced in September 2020.

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

The notes trade with a 70% to 75% delta.

Shopify’s stock traded to a high of $1,453.29 and a low of $1,355.09 before closing the day at $1,432.99, an increase of 6.53%.

Stock skyrocketed after the company announced its payment processing system would be adopted by some Facebook platforms.

Mentioned in this article:

Peloton Interactive Inc. Nasdaq: PTON

Shopify Inc. NYSE: SHOP

Spire Inc. NYSE: SR

Tilray Inc. Nasdaq: TLRY

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