Flexion convertibles pop on acquisition; SoFi notes gain outright, lag dollar-neutral

By Abigail W. Adams

Portland, Me., Oct. 11 – It was a light-volume start to the week in the convertibles secondary space on Monday with U.S. bond markets closed for the Columbus Day holiday.

While there was good activity early in the session with European buyers active in the market, activity petered out as the session progressed.

There was $138 million in reported volume in the early afternoon and $280 million in reported volume about one hour before the market close.

Equities remained volatile with indexes positive early in the session.

However, they turned negative heading into the market close with the Dow Jones industrial average closing the day down 250 points, or 0.72%, the Nasdaq Composite closing the day down 0.64%, the S&P 500 index closing the day down 0.69%, and the Russell 2000 index closing the day down 0.44%.

Flexion Therapeutics Inc.’s 3.375% convertible notes due 2024 were in focus following news Pacira BioSciences Inc. would acquire the company.

The convertible notes popped on both an outright and dollar-neutral basis following the news.

While Pacira BioSciences’ 0.75% convertible notes due 2025 saw light volume, they were improved on an outright basis alongside stock.

SoFi Technologies Inc.’s 0% convertible notes due 2026 also gained as stock surged following an analyst report.

However, the notes were lagging on a dollar-neutral basis on the move up, a source said.

The acquisition

Flexion Therapeutics’ 3.375% convertible notes due 2024 were in focus on Monday following news Pacira BioSciences plans to acquire the company in a cash transaction.

The 3.375% convertible notes due 2024 rose 10 points outright to 99.5 following the news.

The notes gained about 2 points on a dollar-neutral basis, a source said.

Flexion Therapeutics’ stock traded to a high of $9.89 and a low of $9.03 before closing the day at $9.17, an increase of 58.65%.

News broke early Monday that Pacira BioSciences would acquire Flexion for $8.50 per share, in addition to a non-tradeable contingent value right worth up to $8 a share, according to a company news release.

Flexion’s convertible notes will be taken out in the transaction. The contingent value right that is part of the acquisition will have no bearing on the convertible notes.

The convertible notes have long been in busted territory with the premium on the notes “massive,” a source said.

Flexion priced a $201.25 million issue of the 3.375% convertible notes at par in April 2017. Stock was $20.60 when the convertible notes priced.

While hedge players gained on swap, outright accounts were the major winners following news of the acquisition.

Pacira BioSciences is also a convertible notes issuer.

While Pacira’s 0.75% convertible notes due 2025 saw light volume on Monday, the notes were also improved alongside stock.

The 0.75% convertible notes were marked at 105 on Monday.

Pacira’s stock traded to a low of $45.05 and a high of $51.45 before closing the day at $50.76, an increase of 5.82%.

While Pacira’s stock gained on news of the acquisition, there are concerns about how it will be funded and if another capital raise is on the horizon, a source said.

The acquisition is expected to close in the fourth quarter.

SoFi lags dollar-neutral

SoFi Technologies’ recently priced 0% convertible notes due 2026 were also on the rise alongside stock following an analyst report.

However, the 0% convertible notes were lagging dollar-neutral on the way up.

The 0% convertible notes rose about 3 points outright.

They were changing hands at 107.75 versus a stock price of $16.94 early in the session.

However, the notes were contracted 0.5 point to 1 point dollar-neutral on a 60% delta, a source said.

SoFi’s stock traded to a low of $16.83 and a high of $18.51 before closing the day at $18.39, an increase of 13.45%.

Stock skyrocketed after Morgan Stanley analysts initiated coverage of the stock and set a price target of $25.00.

Mentioned in this article:

Flexion Therapeutics Inc. Nasdaq: FLXN

Pacira BioSciences Inc. Nasdaq: PCRX

SoFi Technologies Inc. Nasdaq: SOFI

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