Morning Commentary: LivePerson hits primary market; Applied Optoelectronics eyed

By Abigail W. Adams

Portland, Me., Feb. 28 – The convertibles primary market remained active into February’s close with one deal pricing prior to the market open and another on deck for after the market close.

LivePerson Inc. priced an upsized $200 million of five-year convertible notes prior to the market open Thursday.

The deal was in hot demand during the subscription process with tech paper once again sought after by investors.

Applied Optoelectronics Inc. plans to price $70 million of five-year convertible notes after the market close on Thursday.

The deal looked cheap although the borrow was an issue, a market source said.

Applied Optoelectronics eyed

Applied Optoelectronics plans to price $70 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 4.75% to 5.25% and an initial conversion premium of 25% to 30%.

The deal looked several points cheap, a market source said. However, the borrow on the stock is difficult.

The company is small with a market cap of $280.35 million. However, the provider of fiber-optic networking products does make money and has a good story, a market source said.

Given the size of the company and the offering, the deal was most likely wall-crossed, another source said.

Stock was taking a hit on the convertible notes offering and traded down to $14.16, a decrease of 13.39%, shortly before 11 a.m. ET.

LivePerson oversubscribed

LivePerson priced an upsized $200 million of five-year convertible notes at par with a coupon of 0.75% and an initial conversion premium of 35%.

Pricing came toward the rich end of talk for a coupon of 0.625% to 1.125% and at the rich end of talk for an initial conversion premium of 30% to 35%, according to a market source.

The greenshoe was also upsized to $30 million.

The initial size of the deal was $150 million with a greenshoe of $22.5 million.

The order book for the deal was over 4x oversubscribed at its peak with strong interest from outright and hedge accounts, a market source said.

The interest from top of the line accounts enabled the deal to be upsized with little to no impact on the stock.

Several factors drove demand for LivePerson’s offering, a market source said.

While 2018 was the year for tech in the convertible universe, tech paper has been light in 2019 with 8x8 Inc.’s $250 million offering of 0.5% convertible notes due 2024 the only other deal to price.

“Investors are ready for more tech,” a market source said.

LivePerson also has not tapped capital markets in nearly 20 years and is at the forefront of artificial intelligence messaging platforms.

The company has several marquee clients, such as T-Mobile, and their technology is becoming more widespread.

Investors liked the story. “It’s a true growth story,” a market source said.

The new paper was well-received in the secondary space, another source said.

The notes were trading between 100.5 and 101 with stock largely unchanged early in the session.

“They did well,” a source said.

The new paper dominated activity in the secondary space with more than $50 million of the bonds changing hands early in the session.

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