Super Micro, Sunrun, Lyft convertibles on deck; Parsons jumps; Rivian, Lucid pressured

By Abigail W. Adams

Portland, Me., Feb. 22 – The convertibles primary market unleashed a torrent of deals after a more than two-week hiatus with the holiday-truncated week set to be the highest volume week for issuance since September 2023.

Super Micro Computer Inc. plans to price $1.5 billion of five-year convertible notes, Lyft Inc. plans to price $400 million of five-year convertible notes and Sunrun Inc. plans to sell $475 million of six-year convertible notes after the market close.

In an overnight offering, Parsons Corp. priced $700 million of five-year convertible notes after the market close on Wednesday.

As expected, refinancings were the driving force behind three of the four deals that launched on Wednesday.

However, Super Micro’s offering was new money entering the market, a rare opportunistic capital raise from a high-quality credit commanding pricing terms reminiscent of 2020.

The flurry of primary market activity came on a strong day for equity markets with Nvidia Corp.’s earnings rekindling the AI rally.

The Dow Jones industrial average closed Thursday up 457 points, or 1.18%, the S&P 500 index closed up 2.11%, the Nasdaq Composite index closed up 2.96% and the Russell 2000 index closed up 0.96%.

There was $608 million on the tape about one hour before the market close with new paper and earnings-related volatility driving volume.

Rivian Automotive Inc.’s convertible notes cratered on an outright and dollar-neutral basis after disappointing earnings.

Lucid Group Inc.’s 1.25% convertible notes due 2026 also suffered large losses post-earnings with Lucid’s and Rivian’s results signaling trouble ahead for the EV sector.

Super Micro on tap

In its debut convertible notes offering, Super Micro plans to price $1.5 billion of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 35% to 40%.

The deal was heard to be in the market with assumptions of 175 basis points over SOFR and a 45% vol.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of talk.

The deal did not look as cheap as some of the other deals in the market with the low coupon and high conversion premium increasingly rare.

“But look at the stock,” a source said.

The offering was heard to be playing to strong demand, particularly from hedge accounts, with the market hungry for new paper, especially from a high-quality credit with a high vol. stock.

The company’s stock traded up to a 52-week high of $1,077.87 about two weeks ago before falling 30%.

Super Micro’s stock again exploded in the wake of Nvidia’s earnings to close Thursday at $975.52, up 32.87%.

The surge in stock detracted from the value of the convertible notes with the high conversion premium coming on top of Thursday’s gains, a source said.

However, the offering was heard to be multiple times oversubscribed.

Lyft refinances

Lyft plans to price $400 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.625% to 1.125% and an initial conversion premium of 27.5% to 32.5%.

The deal was in the market with assumptions of 350 bps over SOFR and a 45% vol.

Using those assumptions, the deal looked about 2.5 points cheap at the midpoint of talk, a source said.

The deal looked good and played to strong demand, a source said.

The offering was coming as a refinancing with the company repurchasing a portion of its 1.5% convertible notes due 2025 in privately negotiated transactions.

Sunrun eyed

Sunrun plans to sell $475 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 800 bps over SOFR and a 45% vol.

Using those assumptions, the deal looked about 3.5 points cheap at the midpoint of talk.

The deal looked cheap and there was little doubt it would get done with the offering a refinancing.

Sunrun will repurchase a portion of its 0% convertible notes due 2026 in privately negotiated transactions.

However, investors are wary of the credit and the sector.

Some sources felt underwriters were aggressive with the credit spread, which should be wider.

“That sector has a lot of issues,” a source said.

Parsons jumps on debut

Parsons priced $700 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 2.625% and an initial conversion premium of 25%.

Pricing came in line with talk for a fixed coupon of 2.625% and a fixed conversion premium of 25%.

While the overnight refinancing deal was largely spoken for at launch, the deal was heard to be in the market with assumptions of 200 bps over SOFR and a 23% vol.

The notes jumped on their aftermarket debut.

They were marked at 102.5 bid, 103.5 offered pre-open and continued to rise alongside stock after the opening bell.

They traded as high as 105 early in the session and were changing hands at 104.875 versus a stock price of $78.89 in the late afternoon.

The notes expanded about 2.5 points dollar-neutral, a source said.

There was $67 million in reported volume.

Parsons’ stock traded to a high of $79.48 and a low of $75.58 before closing at $79.44, up 5.51%.

Unlike other overnights that have destroyed the company’s stock, Parsons’ stock was posting gains early Thursday with the repurchasing of the company’s outstanding notes stabilizing the stock price.

The company repurchased $228.1 million in principal of its 0.25% convertible notes due 2025 for $391.8 million in privately negotiated transactions.

The company will also purchase an additional $56.5 million in principal of the 0.25% convertible notes at a purchase price based on the VWAP of stock over a determined period.

The deal “netted out the delta difference between the two,” a source said.

Parsons’ in-the-money 0.25% convertible notes due 2025 trade on a 99% delta, and the new issue was put on a 60% delta.

EV makers stall

Rivian’s convertible notes and Lucid’s 1.25% convertible notes due 2026 suffered large losses on Thursday after both companies posted disappointing earnings that raised concerns for the growth prospects of the EV sector.

Rivian’s 4.625% convertible notes due 2029 sank 20 points outright with stock off more than 25%.

They were trading at 84.625 versus a stock price of $11.33 in the late afternoon.

Sources pegged the notes down 4.5 to 6 points on hedge.

There was $36 million in reported volume.

Rivian’s 3.625% convertible notes due 2030 were down 19 points outright.

They were trading at 72.5 versus a stock price of $11.38 in the late afternoon and were down 4 to 4.5 points on hedge, sources said.

There was $35 million in reported volume.

Rivian’s stock traded to a low of $11.06 and a high of $12.25 before closing at $11.45, off 25.60%.

Rivian reported losses per share of $1.36 versus the losses per share of $1.32 expected.

Revenue was $1.32 billion versus the $1.26 billion expected.

The company’s production forecast also missed expectations and waning demand raised some alarms.

Lucid’s distressed 1.25% convertible notes due 2026 sank on an outright and dollar-neutral basis.

The notes were down 5 points outright with stock off more than 15%.

The convertibles were trading at 40.125 versus a stock price of $3.06 in the late afternoon.

The notes trade on hedge despite their low dollar price.

They contracted 3 points dollar-neutral.

There was $20 million in reported volume.

Lucid’s stock traded to a low of $2.88 and a high of $3.46 before closing at $3.08, down 16.76%.

Lucid reported losses per share of 30 cents versus the 31 cents expected.

Revenue was $157.18 million versus the $181.76 million expected.

Mentioned in this article:

Lucid Group Inc. Nasdaq: LCID

Lyft Inc. Nasdaq: LYFT

Parsons Corp. NYSE: PSN

Rivian Automotive Inc. Nasdaq: RIVN

Sunrun Inc. Nasdaq: RUN

Super Micro Computer Inc. Nasdaq: SMCI

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