LivePerson oversubscribed, expands on debut; Applied Optoelectronics eyed; Novavax tanks

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.

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.

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

The deal was in hot demand during the subscription process with tech paper once again sought after by investors. The new notes expanded on their secondary market debut.

With new paper hitting the secondary space and several convertible issuers seeing large stock moves, there was an uptick in trading volume with more than $568 million bonds on the tape by the late afternoon.

Novavax Inc. was the disaster of Thursday’s session with the notes tanking on an outright and dollar-neutral basis with stock more than slashed in half after a failed clinical trial.

Horizon Pharma plc’s 2.5% convertible notes due 2022, in contrast, were making gains on an outright and dollar-neutral basis on positive results from a clinical trial.

Booking Holdings Inc.’s 0.9% convertible notes due 2021 were active with the notes down outright but expanded dollar-neutral as stock sank post-earnings.

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. Stock closed Thursday at $13.49, a decrease of 17.49%.

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 convertibles 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 tech 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. The 0.75% notes came in as stock dropped into the afternoon and were largely wrapped around par.

They expanded about 0.75 point dollar-neutral, a market source said.

“They did well,” a source said.

LivePerson stock closed Thursday at $27.99, a decrease of 2.06%.

The new paper dominated activity in the secondary space with more than $50 million of the bonds changing hands early in the session and $68 million on the tape by the late afternoon.

Novavax tanks

Novavax’s 3.75% convertible notes due 2023 tanked on both an outright and dollar-neutral basis as stock shaved off almost 70% of its value following the failure of a clinical trial.

The notes dropped more than 33 points on an outright basis. They were seen changing hands at 34 versus an equity price of 70 cents in the late afternoon.

The notes were contracted 15 points dollar-neutral, a market source said. More than $18 million of the bonds were on the tape by the late afternoon.

Novavax stock traded as high as 77 cents and as low as 67 cents before closing the day at 70 cents, a decrease of 66.9%.

Stock tanked after the biotech company’s phase 3 clinical trial for a treatment of viral pneumonia in infants and children failed to meet its goals.

Horizon expands

Horizon’s 2.5% convertible notes due 2022, in contrast, were making gains on an outright and dollar-neutral basis as stock surged following a successful clinical trial.

Horizon’s 2.5% convertible notes jumped more than 11 points outright. They were seen changing hands just south of 116 versus an equity price of $28.44.

The notes were expanded 0.5 to 0.75 point dollar-neutral, a market source said. Given the jump in the stock, sources were disappointed the notes did not see a greater expansion.

The notes were moving on a 45% delta going into Thursday’s session but switched to a 55% delta, a source said.

More than $31 million of the bonds were on the tape late in the session.

Horizon stock closed Thursday at $29.00, an increase of 32.72%.

Stock skyrocketed following positive results from its phase 3 clinical trial for a treatment for thyroid eye disease.

Horizon plans to submit an application to the U.S. Food and Drug Administration mid-year.

Booking’s earnings

Booking’s 0.9% convertible notes due 2021 were down outright but expanded dollar-neutral as stock dropped after the company reported fourth-quarter earnings.

The 0.9% notes dropped about 4 points outright. They were seen changing hands at 110.25 versus an equity price of $1,718.89 in the late afternoon.

However, the notes expanded on their way down, a market source said. They were improved 0.5 to 0.75 point on a dollar-neutral basis, a source said.

More than $33 million of the bonds had changed hands by the late afternoon.

Booking stock closed Thursday at $1,697.04, a decrease of 10.96%.

Stock dropped after the travel fare aggregator reported fourth-quarter earnings.

While Booking beat analyst expectations on both the top and bottom lines, stock was trading down on weak guidance.

Booking reported earnings per share of $22.49 versus analyst expectations of $19.39 per share.

Revenue was $3.213 billion, which beat analyst expectations for revenue of $3.211 billion.

However, Booking anticipates earnings per share of $9.90 to $10.20 for the first quarter, which fell short of analyst expectations for earnings per share of $11.76.

Mentioned in this article:

Applied Optoelectronics Inc. Nasdaq: AAOI

Booking Holdings Inc. Nasdaq: BKNG

Horizon Pharma plc Nasdaq: HZNP

LivePerson Inc. Nasdaq: LPSN

Novavax Inc. Nasdaq: NVAX

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.