Five9 and Teladoc hit the market; Gogo, Pandora active; Aceto’s prospects improve

By Abigail W. Adams

Portland, Me., May 4 – New convertible notes from Five9 Inc. and Teladoc Inc. were the focus of the secondary space on Friday with both notes seen expanded dollar neutral.

While the notes were active, the deals were described as “lackluster, but they got done,” a source said. The pricing left the secondary market little upside potential, the source said.

While the new deals were in focus, earnings news sparked trading action for Gogo Inc. and Pandora Media Inc.’s convertible notes, which both saw high-volume trading.

Gogo’s 3.75% convertible notes due 2020 contracted on a dollar-neutral basis as its stock tanked in response to the company withdrawing its forward guidance.

While Pandora’s stock climbed more than 20% on an earnings beat, the 1.75% convertible notes due 2020 traded up 1.5 points to 2 points outright. Even with the surge in stock, the conversion premium on the notes is still well above 100%.

Aceto Corp.’s 2% convertible notes due 2020 were on the rebound on Friday with the notes climbing more than 10 points outright after the company announced it had obtained waivers to its financial covenants.

The 2% notes went into a freefall after a slew of negative financial news in April.

Five9’s deal

Five9 priced an upsized $225 million of five-year convertible notes after the market close on Thursday at the cheap end of talk with a coupon of 0.125% and an initial conversion premium of 30%.

Price talk had been for a coupon of 0% to 0.125% and an initial conversion premium of 30% to 35%. The deal was increased from $200 million.

The new 0.125% notes were seen trading up to 101 early in the session. “They just got lifted,” a market source said of a recent trade. The notes remained wrapped around 101 for most of the day.

The convertibles were seen expanded about 0.25 point dollar neutral late afternoon. Five9 stock closed Friday at $31.59, an increase of 0.61%.

The notes were dominating trading activity in the secondary market with $47 million of the bonds in play less than two hours after the opening bell.

Teladoc’s deal

Teladoc priced an upsized $250 million of seven-year convertible notes after the market close on Thursday with a coupon of 1.375% and an initial conversion premium of 28.5%.

Pricing came at the cheap end of talk for a coupon of 0.875% to 1.375% and toward the cheap end of talk for a conversion premium of 27.5% to 32.5%. The initial size of the deal had been $225 million.

The notes were seen trading just above par on their market debut. “They’re out the door and in place, but they’re not that exciting,” the source said.

However, sources were happy to see that the deal priced on the cheap end of talk. “I’m glad the market realized everything shouldn’t be priced on the rich end,” a market source said.

The 1.375% notes did expand in the afternoon after stock “caught a bid,” a source said. The notes traded up to 100.75 and were seen expanded about 0.5 point dollar neutral.

The notes also saw high-volume trading with $38.5 million of the bonds in play less than two hours after the opening bell.

Teladoc stock traded to a low of $40.00 and a high of $42.40 before closing the day at $42.20.

Gogo contracts

Gogo’s 3.75% convertible notes due 2020 were down both outright and on a dollar-neutral basis as its stock dropped after the company pulled its forward guidance prior to the market open on Friday.

The 3.75% notes were down about 4 points outright and contracted 1 point dollar neutral in active trading on Friday, a market source said.

The notes were seen trading around 87.5 as the company’s stock slid by more than 13%.

Gogo stock closed Friday at $8.33, a decrease of 13.14%.

Gogo is a “yield-y name,” a source said, and was largely trading for its yield which is now 11.5%.

The inflight internet and entertainment service provider for the aviation industry reported first-quarter earnings prior to the market open.

Gogo beat analyst expectations by a wide margin in its first-quarter earnings report with an earnings loss per share of 34 cents versus the consensus estimate of 59 cents.

However, Gogo withdrew its guidance for adjusted EBITDA, citing an ongoing business planning process.

Gogo recently appointed a new chief executive officer and has undergone a series of leadership changes “to strengthen its organizational structure,” according to a company news release.

Gogo will provide an updated guidance by the second-quarter earnings conference call. The new adjusted EBITDA is expected to be below the previous range of $75 million to $100 million.

Pandora active

Pandora’s 1.75% convertible notes due 2020 were active and up about 1.5 points outright after its stock skyrocketed more than 20% on an earnings beat.

The 1.75% notes were seen trading up to 94 after trading at 92.5 on Thursday, according to a market source. Pandora stock traded as high as $7.25 before closing Friday at $6.89, an increase of 19.83%.

Pandora reported a loss per share of 27 cents, which beat analyst expectations for a loss per share of 38 cents by a wide margin. Subscription and advertising revenue also topped analyst expectations.

While Pandora stock soared on Friday, the conversion premium on the 1.75% notes is still well above 100%. The conversion price for the notes is $16.42.

Pandora stock was $12.63 when the convertible notes priced in 2015.

Aceto rebounds

Aceto’s 2% convertible notes due 2020 were up about 10 points outright on Friday after the company reported third-quarter earnings and announced it had obtained waivers on its financial covenants.

The 2% notes, which went into a freefall mid-April, were trading up to 73 on Friday. The notes dropped more than 30 points to trade in the low to mid 50s after Aceto released a slew of negative news on April 18.

“It’s no longer a sky is falling type of trade,” a market source said.

Aceto announced in April that the company’s chief financial officer resigned, its guidance issued in February could no longer be relied on and the company was exploring strategic alternatives such as the sale of a business segment or merger.

Aceto announced alongside earnings that it had secured waivers on its financial covenants and is working with lenders to develop long-term solutions.

Aceto announced a net loss of $196.6 million, or a net loss of $5.57 per share, and a non-GAAP adjusted earnings per share of 1 cent for the third quarter.

Mentioned in this article:

Aceto Corp. Nasdaq: ACET

Five9 Inc. Nasdaq: FIVN

Gogo Inc. Nasdaq: GOGO

Pandora Media Inc. NYSE: P

Teladoc Inc. NYSE: TDOC

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