Convertibles primary breaks silence; Vertex, Barclays synthetic on tap; Wolfspeed surges

By Abigail W. Adams

Portland, Me., April 22 – The convertibles primary market broke its silence on Monday with two deals launching post-close after three weeks of dormancy.

Vertex Inc. plans to price $250 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Morgan Stanley & Co. LLC is bookrunner for the Rule 144A offering, which carries a greenshoe of $37.5 million.

In the latest synthetic offering to hit the market, Barclays Bank plc plans to price $350 million of five-year cash-settled equity-linked notes tied to Eli Lilly Co. after the market close on Tuesday with price talk for a fixed coupon of 0.25% and a fixed conversion premium of 31%, according to a market source.

Meanwhile, the secondary space saw another sleepy start to the week on Monday although the market firmed as equity indexes logged a strong session.

The Dow Jones industrial average closed Monday up 254 points, or 0.67%, the S&P 500 index closed up 0.87%, the Nasdaq Composite index closed up 1.11% and the Russell 2000 index closed up 1.02%.

While the market firmed after the heaviness of the previous week, “there’s still not a lot of activity,” a source said.

There was $70 million in reported volume about one hour into the session and $400 million on the tape about one hour before the market close.

While investment-grade issues continued to drive volume, topical news and earnings-related news sparked some large price movements.

Wolfspeed Inc.’s convertible notes surged on an outright and dollar-neutral basis after an activist investor with a large stake in the company called for a sale.

Virgin Galactic Holdings Inc.’s deeply distressed 2.5% convertible notes due 2027 fell further into the abyss as the sell-off in stock accelerated after the company proposed a reverse stock split.

Snap Inc.’s 0.125% convertible notes due 2028 were active although little changed with the camera and social media company slated to report earnings on Thursday.

Wolfspeed surges

Wolfspeed’s convertible notes surged on an outright and dollar-neutral basis on Monday after an activist investor disclosed a stake in the company.

The 1.875% convertible notes due 2029 were up 5.5 points outright.

The convertibles were changing hands at 56 versus a stock price of $24.57 in the late afternoon.

The notes expanded 2.5 points dollar-neutral on the move up, a source said.

There was $9 million in reported volume.

The 0.25% convertible notes due 2028 jumped 4 points outright to trade at 58 in the late afternoon. They expanded 1.25 points dollar-neutral.

Wolfspeed’s stock traded to a low of $21.85 and a high of $25.33 before closing at $23.94, up 7.94%.

Wolfspeed’s stock and convertible notes soared mid-session on reports that activist investor Jana Partners, who owns a large stake in the company, was pushing it to consider a sale.

Virgin Galactic plunges

Virgin Galactic’s deeply distressed 2.5% convertible notes due 2027 plunged further into the abyss on Monday as the sell-off in stock accelerated.

The 2.5% notes sank about 5 points outright to a 24-handle. They were trading at 24.625 in the late afternoon with the yield about 63.75%, according to a market source.

There was $7 million in reported volume.

Virgin Galactic’s stock traded to a high of 84 cents and a low of 70 cents before closing at 75 cents, a decrease of 12.17%.

Virgin Galactic has seen heavy selling pressure since last Friday when the company announced a general shareholder meeting with a reverse stock split among the items to be voted on.

The company has long been eyed as a default candidate with a high cash burn rate and a limited ability to raise fresh capital.

“They need money badly,” a source said.

Snap active

Snap’s 0.125% convertible notes due 2028 were active on Monday with the camera and social media company’s highly anticipated earnings report slated for later in the week.

The 0.125% notes were largely unchanged with the notes trading at 75.75 versus a stock price of $11.62 early in the session. They continued to trade around 75.75 in the late afternoon.

The yield was about 7.5%, a source said.

There was $12 million in reported volume.

Snap’s stock traded to a low of $10.88 and a high of $11.75 before closing at $11.14, off 0.27%.

Snap is scheduled to report earnings on Thursday.

The report will be closely watched after the company’s previous earnings report sent stock tumbling about 35%.

The 0.125% convertible notes have largely been stuck in the 75 to 76 context since Snap’s previous earnings report with stock largely trading on an $11-handle.

Mentioned in this article:

Eli Lilly Co. NYSE: LLY

Snap Inc. NYSE: SNAP

Vertex Inc. Nasdaq: VERX

Virgin Galactic Holdings Inc. NYSE: SPCE

Wolfspeed Inc. NYSE: WOLF

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