Zynex on tap; DexCom convertibles in focus, jump on debut; CMS, FirstEnergy gain

By Abigail W. Adams

Portland, Me., May 3 – The convertibles primary market continued to churn out offerings on Wednesday after already cinching the first week of May as the second-highest volume week for new deal activity in 2023.

Zynex Inc. plans to price $50 million of three-year convertible notes in a Rule 144A offering with RBC Capital Markets LLC acting as bookrunner.

The small deal from the medical device company was not being widely marketed with the deal most likely already spoken for by a few private investors, sources said.

The offering comes after DexCom Inc. priced an upsized $1.1 billion of five-year convertible notes after the market close on Tuesday, raising the primary market’s weekly tally to $3.1 billion.

The pricing of DexCom’s notes was extremely aggressive, sources said, with the coupon and premium range harkening from the convertibles market of yesteryear.

However, the deal played to strong demand during bookbuilding and made large gains on an outright and dollar-neutral basis on their aftermarket debut.

The new paper hit the secondary space on a volatile day for equities as the market digested the Federal Open Market Committee’s rate hike decision and deliberations about the state of the economy.

Equity indexes initially surged following the Fed announcement.

However, selling pressure took hold following Fed chair Jerome Powell’s press conference with market players not assuaged by his assurance of the stability of the banking sector and rattled by his warning of the disastrous consequences if the debt-limit is not raised.

Equity indexes closed the day mixed with the Dow Jones industrial average down 270 points, or 0.80%, the S&P 500 index down 0.70%, the Nasdaq Composite index down 0.46% and the Russell 2000 index up 0.45%.

New paper continued to jumpstart activity in the space with recorded convertibles trading volume $1 billion plus about one hour before the market close.

“Volume is back,” a source said. “It is nice to see.”

CMS Energy Corp.’s new 3.375% convertible notes due 2028 (Baa2) and FirstEnergy Corp.’s 4% convertible notes due 2026 continued to see heavy volume with the notes adding to the strong gains made on their aftermarket debut the previous session.

DexCom jumps

DexCom priced an upsized $1.1 billion, from $1 billion, of five-year convertible notes after the market close on Tuesday at par with a coupon of 0.375% and an initial conversion premium of 37.5%.

Pricing came at the midpoint of talk for a coupon of 0.25% to 0.5% and at the cheap end of talk for an initial conversion premium of 37.5% to 42.5%, according to a market source.

The pricing of the notes was aggressive with the deal modeling out to fair value at the midpoint of talk based on underwriters’ assumptions of 200 basis points over SOFR and 42% vol., a source said.

“They got away with murder,” a source said.

Despite the richness of the offering, the deal played to strong demand with DexCom a well-known and well-liked name in the market with a track record of success.

The medical device company’s stock also had a high vol., which has been lacking in the investment-grade issuance that has dominated the space, a source said.

DexCom’s new notes were strong out of the gate with the notes changing hands at 102.125 versus a stock price of $119.19 early in the session.

While they came in to close the day off their highs, the 0.375% notes held onto strong outright and dollar-neutral gains.

The notes were trading just north of 101.375 versus a stock price of $118.28 in the late afternoon.

They expanded about 1.25 points dollar-neutral, a source said.

There was $200 million in reported volume.

DexCom’s stock wavered between gains and losses on Wednesday.

Stock traded to a low of $116.79 and a high of $119.858 before closing at $117.32, a decrease of 0.68%.

Day 2

CMS Energy’s new 3.375% convertible notes due 2028 and FirstEnergy’s 4% convertible notes due 2026 continued to add to the strong gains made on their aftermarket debut the previous session.

CMS’ 3.375% convertible notes added another 1 point outright with stock in positive territory in intraday activity.

The notes were seen at 101.625 versus a stock price of $61.45 early in the session.

They climbed to 102 versus a stock price of $62.09 in the late afternoon.

The notes continued to add on swap.

There was $190 million in reported volume.

CMS’ stock traded to a low of $61.05 and a high of $62.31 before closing at $61.19, down 0.49%.

The notes expanded 1.5 points dollar-neutral on their aftermarket debut on Tuesday.

FirstEnergy’s 4% convertible notes due 2026 gained about 0.625 point outright with stock closing the day in positive territory.

The 4% notes were trading just shy of 101 versus a stock price of $38.60 early in the session, according to a market source.

They traded up to 101.375 versus a stock price of $39.16 in the late afternoon.

There was $30 million in reported volume.

FirstEnergy’s stock traded to a low of $38.50 and a high of $39.25 before closing at $38.93, an increase of 0.46%, shortly before 11 a.m. ET.

Mentioned in this article:

CMS Energy Corp. NYSE: CMS

DexCom Inc. Nasdaq: DXCM

FirstEnergy Corp. NYSE: FE

Zynex Inc. Nasdaq: ZYXI

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