Integer convertibles on tap; Lucid levels off; Coupa, Splunk, Western Digital active

By Abigail W. Adams

Portland, Me., Jan. 30 – The convertibles primary market returned to action on Monday with one new offering on deck.

Integer Holdings Corp. plans to price $375 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.125% to 2.625% and an initial conversion premium of 27.5% to 32.5%.

BofA Securities Inc. (lead left), Citigroup Global Markets Inc. and Wells Fargo Securities LLC are bookrunners for the Rule 144A deal, which carries a greenshoe of $56.25 million.

The deal jumpstarts a primary market that has been dormant since FARO Technologies Inc.’s wall-crossed $75 million issue of 5.5% convertible notes due 2028, which priced at par on Jan. 19.

While the deal comes on a rough day for equity markets, a roll-over in equities tends to push potential issuers that are on the fence into action, a source said.

Meanwhile, it was a slow start to the week in the convertibles secondary space with equity markets launching a heavy week for earnings and macro events in the red.

Equity indexes launched Monday’s session in negative territory, turned mixed within the first hour of trading, but again slumped to end the day deep-in-the-red as the market awaits a slew of earnings reports due and the Federal Open Market Committee’s decision on interest rates on Wednesday.

The Dow Jones industrial average closed Monday down 261 points, or 0.77%, S&P 500 index closed down 1.3%, the Nasdaq Composite index closed down 1.96% and the Russell 2000 index closed down 1.11%.

There was $53 million in reported volume about one hour into the session and $295 million on the tape about one hour before the market close.

Lucid Group Inc.’s 1.25% convertible notes due 2026 continued to dominate activity in the secondary space with the notes leveling off after the blockbuster gains of the previous session.

Short-duration notes remained sought after with Splunk Inc.’s soon-to-mature 0.5% convertible notes due Sept. 15, 2023 and Western Digital Corp.’s 1.5% convertible notes due Feb. 1, 2024 (Baa3) active.

Coupa Software Inc.’s 0.375% convertible notes due 2026 also continued to see heavy volume as market players eye the closing of the company’s acquisition.

Lucid levels off

Lucid’s 1.25% convertible notes due 2026 continued to dominate activity in the secondary space with the notes leveling off after the explosive gains of the previous session.

The 1.25% notes briefly dipped down to 64.75 but were again wrapped around 65.5 heading into the market close, according to a market source.

There was $17 million in reported volume.

While the convertible notes are not equity sensitive, Lucid’s stock fell on Monday as the buying frenzy in the name subsided.

Lucid’s stock traded to a high of $13.08 and a low of $11.58 before closing the day at $11.75, a decrease of 8.7%.

While the buying frenzy in Lucid’s stock subsided on Monday, its convertible notes held onto the 12-point gain of last Friday’s session.

Lucid transformed last Friday’s session from a relatively uneventful one to one of outsized gains for some market players as the EV startup’s stock and convertible notes skyrocketed on rumors the Saudi Public Investment Fund was eyeing a buyout of the company.

The rumor has not been confirmed.

Short-duration

Short-duration convertible notes remained sought after in the secondary space with Splunk’s 0.5% convertible notes due Sept. 15, 2023 seen in trade.

While active, the notes saw little movement in price.

The 0.5% notes were changing hands at 97.5 versus a stock price of $93.30 early in the session with a yield of 4.5%, according to a market source.

They were trading at 97.25 versus a stock price of $92.53 and a yield of about 4.9% in the late afternoon.

There was $8 million in reported volume.

Splunk’s stock traded to a high of $94.20 and a low of $91.35 before closing the day at $93.65, a decrease of 1.71%.

Western Digital’s 1.5% convertible notes due Feb. 1, 2024 also continued to see heavy volume.

The 1.5% notes were seen at 96.125 in the late afternoon with the yield about 5.5%.

There was $7 million in reported volume.

Coupa’s 0.375% convertible notes due 2026 remained active as market players eye the company’s takeout.

The 0.375% notes continued to trade on a 97-handle and were wrapped around 97.5 heading into the market close.

Coupa’s 0.375% notes were lifted to a 97-handle last week as the closing of Thoma Bravo’s acquisition of the company draws closer.

The deal is expected to close in the first half of 2023 with the convertible notes to be taken out at par.

“That’s a risk arb play,” a source said of the activity in the name.

Mentioned in this article:

Coupa Software Inc. Nasdaq: COUP

Integer Holdings Corp. NYSE: ITGR

Lucid Group Inc. Nasdaq: LCID

Splunk Inc. Nasdaq: SPLK

Western Digital Corp. Nasdaq: WDC

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