Morning Commentary: 8x8 hits market, expands on debut; Inovio prices; Innovative eyed

By Abigail W. Adams

Portland, Me., Feb. 14 – New convertibles paper was in focus on Thursday with two new deals hitting the secondary space and one more deal on deck.

8x8 Inc. priced an upsized $250 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 0.5% and an initial conversion premium of 30%.

Pricing came at the rich end of talk for a coupon of 0.5% to 1% and at the midpoint of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.

The new paper dominated activity in the secondary space and expanded on debut.

The 0.5% convertible notes were trading between 100.625 and 101 early in Thursday’s session with stock flat to down slightly, according to a market source.

More than $68 million of the bonds were on the tape less than one hour into Thursday’s session.

8x8 stock traded at $19.63, a decrease of 0.61%, shortly before 11 a.m. ET.

Inovio Pharmaceuticals, Inc. priced $65 million of five-year convertible notes prior to the market open on Thursday at the cheap end of talk with a coupon of 6.5% and an initial conversion premium of 15%.

Price talk had been for a coupon of 6% to 6.5% and an initial conversion premium of 15% to 20%, according to a market source.

The deal was slow to trade in the secondary space, which is to be expected given its size, a market source said.

However, the few trades on the tape were wrapped around par despite stock tanking early in the session, the source said.

Inovio stock traded down to $3.79, a decrease of 19.02%, shortly before 11 a.m. ET.

While new paper from 8x8 largely occupied the secondary space on Thursday, one more deal is on deck.

Innovative Industrial Properties Inc. plans to price $100 million of five-year exchangeable notes after the market close on Thursday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 15% to 20%, according to a market source.

The notes will be issued by subsidiary IIP Operating Partnership, LP and exchangeable into Innovative Industrial Properties stock.

The deal was heard to be in the market with a credit spread of 500 bps over Libor and a 35% vol., a market source said.

Assuming a tough borrow rate of 4%, the deal modeled about 1.75 points cheap at the midpoint of talk, according to a market source.

The deal was priced well, especially for outright accounts, a market source said.

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