Morning Commentary: NeoGenomics convertible offering eyed; Tilray notes in focus early

By Abigail W. Adams

Portland, Me., Jan. 6 – The convertibles primary market returned to action the first week of the New Year with one offering slated to price after the market close.

NeoGenomics Inc. plans to price $250 million of seven-year convertible notes with price talk for a coupon of 0.25% to 0.75% and an initial conversion premium of 30% to 35%, according to a market source.

Using assumptions of 450 basis points over Libor and a 40% vol., the deal looked 0.35 point cheap at the midpoint of talk, a source said.

Another source felt the company deserved a tighter credit spread. Using a credit spread of 400 bps, the deal looked 0.22 point cheap.

The company makes money and is cash flow positive. “The trend is your friend, and it’s an upward trending stock,” the source said.

Meanwhile, the secondary space remained active with equities volatile as the market awaited the outcome of the final runoff election in Georgia, which will determine control of the Senate.

There was $86 million in reported volume about one hour into the session, a source said.

Tilray Inc.’s 5% convertible notes due 2023 were in focus as cannabis stocks surged with democratic control of the Senate considered a positive for the industry.

The 5% notes were changing hands at 86.75 early in the session with a yield of 10.72%.

The notes were largely trading for their yield with their duration short, a source said.

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