Pebblebrook convertibles offering eyed; Uber gains continue; 8x8 skyrockets outright

By Abigail W. Adams

Portland, Me., Dec. 10 – The convertibles primary market continued to roll out new offerings, adding to an already groundbreaking year for new issuance.

Pebblebrook Hotel Trust plans to price $350 million of six-year convertible notes after the market close on Thursday.

The deal brings the weekly tally to $1.9 billion over three deals.

With next week the last full trading week before the holidays, sources were mixed about the prospects for more new deals.

With returns broaching more than 40% for some accounts, many may be ready to call it a year, a source said.

However, with market conditions strong, issuers may still want to take advantage and squeak a deal in before the traditional end-of-year slowdown.

Meanwhile, the convertibles secondary space continued to see heavy volume with $207 million on the tape a little over one hour into the session and $614 million on the tape about one hour before the close.

Uber Technologies Inc.’s 0% convertible notes due 2025 remained active and continued to gain on an outright and dollar-neutral basis.

MicroStrategy Inc.’s 0.75% convertible notes due 2025 also continued to gain on an outright basis as stock improved.

Outside of the new paper, 8x8 Inc.’s 0.5% convertible notes due 2024 skyrocketed on an outright basis as stock shot up more than 30% after the company hired a new CEO.

Pebblebrook in focus

Pebblebrook plans to price $350 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be in the market with assumptions of 525 basis points over Libor and a 35% vol., sources said.

Using those assumptions, the deal looked 2.73 points cheap at the midpoint of talk, a source said.

However, another source pegged assumptions at 800 bps over Libor and a 45% vol., which modeled out to par.

While the real estate investment trust that focuses on urban hotels and lifestyle resorts has straight debt that was priced at 250 bps to 275 bps over Libor, that was pre-Covid, a source said.

“They’re income is getting worse every month,” the source said.

Uber trades higher

Uber’s 0% convertible notes due 2025 continued to gain on an outright and dollar-neutral basis their second day in the secondary space.

The notes traded up to 104.625 early in the session with stock off early in the session.

They were changing hands just shy of 105 versus a stock price of $53.99 in the late afternoon.

The notes expanded another 1 point dollar-neutral, a source said.

There was more than $16 million in reported volume about one hour before the market close.

Uber’s stock traded to a low of $51.30 and a high of $54.62 before closing the day at $54.35, an increase of 0.85%.

The notes expanded 3 to 3.5 points on their aftermarket debut.

The deal was in demand during bookbuilding with the offering almost 8x oversubscribed, Prospect News reported.

MicroStrategy Day 2

MicroStrategy’s 0.75% convertible notes due 2025 remained active their second day in the secondary space, with the notes continuing to gain on an outright basis as stock improved.

The 0.75% notes were up about 1 point outright.

They were trading at 104 versus a stock price of $283.21 in the late afternoon.

There was more than $12 million in reported volume.

MicroStrategy’s stock traded to a high of $291.77 and a low of $282.38 before closing the day at $290.33, an increase of 1.44%.

The 0.75% notes traded up to 103 on an outright basis and were seen expanded 3.5 to 5 points dollar-neutral on their aftermarket debut.

8x8 skyrockets

8x8’s 0.5% convertible notes due 2024 skyrocketed on an outright basis as stock jumped more than 30% following the appointment of a new CEO.

The 0.5% notes were up more than 20 points outright.

They were changing hands at 126.875 versus a stock price of $28.30 in the late afternoon.

8x8’s stock traded to a low of $23.50 and a high of $29.91 before closing the day at $28.65, an increase of 34.73%.

Stock soared after the cloud-based communications business announced that it had hired Dave Sipes, the former chief operating officer for competitor RingCentral, as its new CEO.

Mentioned in this article:

8x8 Inc. NYSE: EGHT

MicroStrategy Inc. Nasdaq: MSTR

Pebblebrook Hotel Trust NYSE: PEB

Uber Technologies Inc. NYSE: UBER

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