Welltower, TransMedics convertible notes offerings emerge; Zscaler up on earnings

By Abigail W. Adams

Portland, Me., May 8 – The convertibles primary market was in high gear on Monday with four deals totaling $1.975 billion launching.

Serial issuer Wayfair Inc. plans to price $600 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 22.5% to 27.5%, according to a market source.

Citigroup Global Markets Inc. and Goldman Sachs & Co. LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $90 million.

In a deal set to price shortly after it was announced, Granite Construction Inc. plans to sell $325 million of five-year convertible notes after the market close on Monday.

The deal looked cheap based on underwriters’ assumptions but was pre-sold to holders of its outstanding notes, a source said.

Welltower OP LLC plans to price a $750 million offering of five-year notes exchangeable for Welltower Inc. shares (Baa1), and TransMedics Group Inc. plans to sell $300 million of five-year convertible notes also after the market close on Monday.

The deals looked cheap and played to solid demand during bookbuilding, sources said.

The offerings launched on a mixed day for equities with indexes shaking off early losses to close either side of unchanged.

The Dow Jones industrial average closed Monday down 56 points, or 0.17%, the S&P 500 index closed up 0.05%, the Nasdaq Composite index closed up 0.18% and the Russell 2000 index closed down 0.31%.

While the primary market was active, the convertibles secondary space was off to a slow start with $41 million in reported convertibles trading volume about one hour into the session and $387 million on the tape about one hour before the market close.

Earnings-related news continued to spark movement in outstanding issues with Zscaler Inc.’s 0.125% convertible notes due 2025 making large outright gains and expanding dollar-neutral as stock soared double-digits after upwardly revising its earnings forecast.

Enovix Corp.’s 3% convertible notes due 2028 popped back above par on a strong day for stock after trading as low as the mid-80s less than two weeks ago.

Granite pre-sold

Granite Construction plans to price $325 million of five-year convertible notes after the market close on Monday with price talk for a fixed coupon of 3.75% and a fixed initial conversion premium of 30%, according to a market source.

The deal was heard to be marketed with assumptions of 375 basis points over SOFR and a 29% vol.

Using those assumptions, the deal looked 3.59 points cheap, a source said.

However, the deal was already spoken for with the majority to be placed with holders of the company’s outstanding convertible notes.

The company will enter into privately negotiated transactions with holders of its 2.75% convertible notes due 2024 to exchange a portion of the notes for cash and shares.

Welltower on tap

Welltower plans to sell a $750 million offering of five-year exchangeable notes (Baa1) after the market close on Monday with price talk for a coupon of 2.25% to 2.75% and an initial exchange premium of 22.5% to 27.5%.

The deal was heard to be in the market with assumptions of 175 bps over SOFR and a 26% vol.

The senior housing and health care-focused REIT is the latest investment-grade issuer to tap the convertibles market for refinancing needs.

Proceeds will be used for general corporate purposes, which may include the repayment or redemption of the company’s 4.5% senior notes due Jan. 15, 2024 and 3.625% senior notes due March 15, 2024.

The deal was heard to be playing to solid demand.

“WELL is going well,” a source said.

However, there was limited excitement about the deal due to the plethora of investment-grade issuance in recent months.

TransMedics a ‘blowout’

TransMedics plans to sell $300 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of a 550 bps spread over SOFR and a 45% vol.

Using those assumptions, the deal looked 2.16 points cheap at the midpoint of talk, a source said.

The deal was a “blowout,” another source said, with strong demand from hedge accounts.

Zscaler’s earnings

Zscaler’s 0.125% convertible notes due 2025 were on the rise in active trade as stock soared double digits following earnings.

The 0.125% notes rose 6 to 7 points outright with stock up over 20%.

The convertibles were changing hands at 102.75 in the late afternoon.

The notes expanded 0.5 point dollar-neutral on the move up.

The convertible notes bounced after trading down to a historic low of 95 heading into earnings.

Zscaler’s stock traded to a low of $103.62 and a high of $109.90 before closing at $107.92, an increase of 20.63%.

Stock soared after the cyber-security company upwardly revised its earnings forecast.

The company now expects to report third-quarter revenue of $415 million to $419 million versus its prior forecast for $396 million to $398 million.

Full-year revenue forecasts were also lifted to $1.587 billion to $1.591 billion from the previous forecast of $1.558 billion to $1.563 billion.

Zscaler will post earnings on June 1.

Enovix above par

Enovix’s volatile 3% convertible notes due 2028 popped back above par on a strong day for the company’s stock.

The 3% notes traded up to 103 in the late afternoon.

However, they were moving in line dollar-neutral, a source said.

Enovix’s stock traded to a low of $12.51 and a high of $13.36 before closing at $13.33, an increase of 5.46%.

The lithium-ion battery manufacturer’s 3% convertible notes have been volatile since the $1.72.5 million issue priced in late April.

The notes traded as high as 107 on debut but quickly plummeted to the mid-80s before rebounding.

The company “is a highly speculative and volatile name,” a source previously said.

Mentioned in this article:

Enovix Corp. Nasdaq: ENVX

Granite Construction Inc. NYSE: GVA

TransMedics Group Inc. Nasdaq: TMDX

Wayfair Inc. NYSE: W

Welltower Inc. NYSE: WELL

Zscaler Inc. Nasdaq: ZS

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