Datadog, Cerence convertibles expand; Bilibili contracts; May volume highest since 2009

By Abigail W. Adams

Portland, Me., May 29 – The convertibles primary market rounded out another active week with three issuers pricing a cumulative $1.5 billion.

Datadog Inc. priced an upsized $650 million of five-year convertible notes, Bilibili Inc. priced an upsized $700 million of seven-year convertible notes and Cerence Inc. sold $150 million of long five-year convertible notes after the market close on Thursday.

The three deals brought the weekly tally to $3.325 billion with the truncated post-holiday week doing little to dampen the pipeline.

The convertibles primary market logged a near record-setting month for new deal activity with $23 billion pricing over 43 deals in May.

It was the highest volume month for new deal activity since December 2009 when $24.57 billion priced in 12 deals, according to data compiled by Prospect News.

The monthly tally brings the year-to-date total to $52.92 billion with 2020 poised to beat records for convertibles issuance.

The previous year was the highest volume month for convertibles issuance since the global financial crisis – $58.367 billion priced in 136 deals.

Meanwhile, new paper remained in focus in the secondary space. However, the deals to hit the market on Friday had mixed performances.

New paper from Bilibili was down on both an outright and dollar-neutral basis while new paper from Datadog and Cerence expanded.

Datadog in demand

Datadog priced an upsized $650 million of five-year convertible notes after the market close on Thursday at par at the rich end of talk with a coupon of 0.125% and an initial conversion premium of 37.5%, according to a market source.

Price talk was 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 greenshoe was also upsized to $97.5 million.

The initial size of the deal was $550 million with a greenshoe of $82.5 million.

The new paper was putting in a strong performance in the secondary space.

It traded up to 104 on an outright basis and was expanded 2.5 to 3 points dollar-neutral, a source said.

The new paper was the most actively traded in the secondary space with more than $100 million in reported volume by the mid-afternoon.

Datadog stock traded to a low of $67.50 and a high of $71.47 before closing the day at $71.27, an increase of 6.17%.

Bilibili contracts

Bilibili sold an upsized $700 million of seven-year convertible notes after the market close on Thursday at par at the cheap end of talk with a coupon of 1.25% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 0.75% to 1.25% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The initial size of the deal was $650 million.

The new 1.25% notes were struggling in the secondary space.

“They can’t get out of their own way,” a source said.

The 1.25% notes traded down to 99 early in the session.

The notes continued to trade down on an outright basis as the session progressed and were as low as 97.5 in the mid-afternoon, a source said.

The notes were contracted about 2.5 points dollar-neutral.

The deal was upsized, which contributed to its poor performance, a source said.

There were few bids in the aftermarket for the notes.

The Shanghai-based online entertainment company’s notes also had a long maturity and had to contend with unstable relations between the United States and China.

The new paper hit the space as the market awaited president Donald Trump’s news conference on China.

While the market was concerned of a pull-out from the Phase 1 trade deal, equities traded off their lows following the news conference with the trade deal still intact.

Bilibili’s American Depositary Shares traded to a low of $30.44 and a high of 32.77 before closing the day at $32.43, an increase of 5.5%.

Cerence trades up

Cerence priced $150 million of long five-year convertible notes after the market close on Thursday at par at the midpoint of talk with a coupon of 3% and an initial conversion premium of 35%.

Price talk was for a coupon of 2.75% to 3.25% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The new paper traded up on an outright and dollar-neutral basis early Friday.

The notes were changing hands at 101.5 outright early in the session.

They continued to improve as the session progressed and were up to a 103-handle by the mid-afternoon.

The notes were expanded about 1 point dollar-neutral.

Cerence stock traded to a low of $27.15 and a high of $30.56 before closing the day at $29.91, an increase of 7.92%.

Mentioned in this article:

Bilibili Inc. Nasdaq: BILI

Cerence Inc. Nasdaq: CRNC

Datadog Inc. Nasdaq: DDOG

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