Rapid7, NII Holdings on tap; Zillow, Twilio, Five9, Etsy see large moves; Tesla talk of the town

By Abigail W. Adams

Portland, Me., Aug. 7 – The window of opportunity for new deal activity in August is short with the majority of new deal volume expected over the next two weeks.

The primary market jumped to take advantage of the wind-down of the earnings season blackout with two deals launching after the market close.

NII Holdings, Inc. launched an offering of $75 million five-year convertible notes after the market close on Tuesday, according to a company news release.

Further details were not available by press time.

Rapid7, Inc. plans to price $175 million in five-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 30% to 35%, according to a market source.

Barclays Capital Inc. and RBC Capital Markets are bookrunners for the Rule 144A deal, which carries a greenshoe of $26.25 million.

Meanwhile, the secondary space was active on Tuesday with several issuers seeing large movements post-earnings reports.

Zillow Group Inc.’s 2% convertible notes due 2021 and recently priced 1.5% convertible notes due 2023 “took it on the chin,” on an outright basis as stock plummeted on Monday.

However, the 2% notes expanded on hedge.

Etsy Inc.’s 0% convertible notes due 2023, Twilio Inc.’s 0.25% convertible notes due 2023 and Five9 Inc.’s 0.125% convertible notes due 2023 all reached their highest outright prices since hitting the market as the companies’ stocks soared after earnings reports.

However, Tesla Inc. was “the talk of the town” after chief executive officer Elon Musk tweeted that he was considering taking the company private, a market source said.

While tranche B stood to gain from a takeout at the price mentioned in the tweet, tranche A and C would lose value, another source said.

Zillow plummets

Zillow’s stock and convertible notes were on the move on Tuesday with the convertible notes seeing large outright drops as the stock plummeted post earnings.

Zillow’s 2% convertible notes due 2021 were down more than 12 points outright to trade between 113 and 114 on Tuesday, according to Trace data. However, the notes expanded about 0.5 point dollar-neutral, a market source said.

The company’s recently priced 1.5% convertible notes due 2023 sunk to their lowest outright price since hitting the market with outright trades between 93.5 and 94.25.

The notes had opened Monday at par, according to Trace data.

While there was a large seller early Tuesday, trading of the notes quieted into the afternoon, a market source said.

The stock plummeted as much as 17% on Tuesday, trading as low as $47.83 before closing the day at $49.80, a decrease of 14.36%.

While Zillow reported an earnings beat, the company reported disappointing revenues and forward guidance.

However, the stock tanked on news the online real estate company acquired mortgage lender Mortgage Lenders of America.

Etsy’s earnings

Etsy’s 0% convertible notes due 2023 jumped more than 15 points on Tuesday to reach its highest outright price since hitting the market in early March.

The notes were seen expanded 0.5 point dollar-neutral, a market source said.

However, the notes were not active into the afternoon as the stock came in from an initial 12% jump early in the session.

The 0% notes traded up to 147 with the stock up to $46.82 early in the session. The stock traded as high as $50.60 during Tuesday’s session but closed the day at $43.83, an increase of 3.3%.

Etsy missed analyst expectations with earnings of 3 cents per share but beat expectations for revenue with a figure of $132.4 million.

Analysts had expected earnings per share of 4 cents and revenue of $127.1 million, Investor’s Business Daily reported.

Twilio’s earnings

Twilio’s 0.25% convertible notes due 2023 dominated trading activity in the secondary space with the notes up more than 10 points outright as the stock also skyrocketed post earnings.

The 0.25% notes traded north of 123 early Tuesday, the highest outright price for the convertible notes since they hit the market in mid-May, according to Trace data.

Sources pegged the notes up 0.5 point to 1 point on a dollar-neutral basis.

Twilio’s stock skyrocketed on Tuesday with the notes up as much as 22% in intraday trading. Twilio stock closed Tuesday at $75.1, an increase of 18.7%.

Twilio reported earnings per share of 3 cents for the second quarter versus analyst expectations of a loss per share of 5 cents.

The company also beat on revenue with $147.8 million reported in the second quarter versus analyst expectations of $131.1 million.

Five9 earnings

Five9’s 0.125% convertible notes due 2023 also reached their highest outright price since hitting the market in early May after the company reported a large earnings beat.

The notes were seen trading up about 15 points outright to 116 early Tuesday with the stock up more than 20%.

The convertible notes continued to climb into the afternoon gaining another 4 points outright to trade at 120.

Five9 stock closed Tuesday at $43.53, an increase of 24.23%.

Five9 beat analyst expectations with earnings per share of 11 cents. Analyst had expected earnings per share of 4 cents.

Tesla talk

Tesla’s convertible notes zoomed into focus on Tuesday afternoon after CEO Musk tweeted he was considering taking the company private with a takeout price of $420.

The tweet temporarily halted trading of Tesla stock but not before it rose more than 7%.

The tweet was “the talk of the town,” with people giving credence to the idea, a market source said.

While Tesla’s 1.25% convertible notes due 2021 stood to gain, assuming the takeout price in the tweet, the 0.25% convertible notes due 2019 and 2.375% convertible notes due 2022 would lose, a market source said.

The 0.25% convertible notes would lose 1 point on hedge on a 50% delta.

The 1.25% convertible notes stand to gain 1.5 point dollar-neutral on a 72% delta.

And the 2.375% notes would lose almost 3 points, a market source said.

The convertible notes were up about 0.5 point dollar-neutral on Tuesday, a market source said.

In scattered activity, the 0.25% notes traded up about 1.5 point outright to 111. They were quoted at 114 at market close, according to a market source.

The 1.25% notes traded up almost 9 points outright to 121. They were quoted at 120.46 at market close.

The 2.375% notes were up about 2 points outright to 122, although they were lightly traded. They were quoted at 128.41 at market close.

Trading of Tesla stock was suspended briefly after Musk’s tweet but resumed shortly before the market close. Tesla stock closed Tuesday at $380.50, an increase of 11.26%.

Musk’s tweet about taking the company private came soon after news broke that Saudi Arabia’s sovereign wealth fund bought about a 5% stake in Tesla.

The borrow on Tesla stock has always been difficult but has become more available in recent days. There is concern given the recent news it will become more difficult again, a market source said.

Mentioned in this article:

Etsy Inc. Nasdaq: ETSY

Five9 Inc. Nasdaq: FIVN

NII Holdings, Inc. Nasdaq: NIHD

Rapid7, Inc. Nasdaq: RPD

Tesla Inc. Nasdaq: TSLA

Twilio Inc. NYSE: TWLO

Zillow Group Inc. Nasdaq: Z

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