Shift4 tightens talk; Progenity on deck; LivePerson expands on debut; Slack contracts

By Abigail W. Adams

Portland, Me., Dec. 2 – New convertibles paper remained in focus on Wednesday with one new deal hitting the aftermarket and two more set to price after the market close.

Following a two-day marketing period, Shift4 Payments Inc. plans to price $400 million of five-year convertible notes and Progenity Inc. plans to sell $75 million of five-year convertible notes after the market close on Wednesday.

Shift4’s offering was in demand during bookbuilding with talk tightening.

LivePerson Inc. became the latest issuer to price with a 0% coupon, a growing trend in the convertibles universe.

The new paper saw a large dollar-neutral expansion on debut.

Outside of the new paper, Slack Technologies Inc.’s 0.5% convertible notes due 2025 were active following Salesforce.com Inc.’s acquisition of the company.

The notes were contracting on Wednesday although the major move down was last week, sources said.

Shift4 tightens talk

Shift4 Payments’ offering of $400 million five-year convertible notes was in demand during bookbuilding with talk tightening.

Revised talk is for a coupon of 0% to 0.25% and an initial conversion premium of 42.5% to 45%, according to a market source.

Initial price talk was for a coupon of 0.25% to 0.75% and an initial conversion premium of 37.5% to 42.5%.

Underwriters were marketing the deal with assumptions of 400 basis points over Libor and a 42% vol., which looked 2.625 points cheap at the midpoint of talk.

The deal is pricing with a concurrent equity offering of 8 million shares.

Progenity eyed

Progenity plans to price $75 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 6.75% to 7.25% and an initial conversion premium of 10% to 15%, according to a market source.

The deal modeled up to 3 points cheap, a source said. However, there was no borrow on the stock.

“With no borrow, that’s kind of meaningless,” the source said.

The company only recently went public with its initial public offering in June.

The convertible notes are pricing concurrently with a secondary offering of $25 million in common stock.

The small deal was wall-crossed and is not expected to trade much in the aftermarket.

Entities affiliated with Athyrium Capital Management LP plan to purchase $25 million of the Rule 144A offering, in addition to $78.5 million of convertible notes as part of a separate exchange agreement.

LivePerson expands

LivePerson priced $450 million of six-year convertible notes after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 42.5%.

Pricing came at the rich end of initial talk for a coupon of 0% to 0.5% and richer than initial talk for a conversion premium of 35% to 40%.

The deal was in demand during bookbuilding with allocations tight.

The demand followed the notes into the secondary space.

The notes were marked at 103.375 bid, 103.75 offered in the late afternoon, a source said.

They were seen expanded upwards of 2.5 points dollar-neutral earlier in the session.

LivePerson’s stock traded to a high of $55.55 and a low of $53.37 before closing the day at $55.50, an increase of 5.13%.

Slack’s buyout

Slack Technologies’ 0.5% convertible notes due 2025 continued to contract dollar-neutral following Salesforce.com’s formal announcement that it would acquire the software company in a $27.7 billion stock and cash deal.

The 0.5% convertible notes were changing hands around 146.75 late Wednesday afternoon.

They were contracted about 1 point dollar-neutral, a source said.

With the deal more than 10% cash, the 0.5% notes will be taken out in the acquisition.

“It was a loser on the takeout table,” a source said, “like most stuff that has richened so much from issue.”

The 0.5% notes were also under pressure last week and contracted as much as 4 points dollar-neutral as rumors of the acquisition spread through the market.

It was unclear last week what the cash-to-stock ratio would be in the acquisition and whether the notes would be taken out.

However, if they remained outstanding, Salesforce.com’s stock has a lower volatility than Slack’s stock, so hedge players were bound to lose out, a source said.

While the notes saw a large dollar-neutral contraction as a result of the acquisition, they soared on an outright basis.

The notes jumped from 122 to a high of 150 last week, a source said.

In its largest acquisition to date, Salesforce.com will acquire Slack for $27.7 billion with Slack shareholders receiving $26.79 in cash and 0.0776 shares of Salesforce.com stock.

The deal is expected to close in the second quarter of 2021.

Slack priced an $862.5 million issue of the 0.5% convertible notes due 2025 in April.

Mentioned in this article:

LivePerson Inc. Nasdaq: LPSN

Progenity Inc. Nasdaq: PROG

Shift4 Payments Inc. NYSE: FOUR

Slack Technologies Inc. NYSE: WORK

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