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Morning Commentary: Planned LinkedIn deal looks slightly cheap; related names slip
By Rebecca Melvin
New York, Nov. 5 – Convertibles players were sizing up the planned LinkedIn Corp. offering of $1.5 billion of five-year convertible senior notes early Wednesday that was expected to price after the market close.
The deal was seen worth about 101 at the midpoint of talk using a credit spread of 175 basis points over Libor and 35% vol., according to a Connecticut-based trader.
Price talk was 0% to 0.5% for the coupon and 40% to 45% for the initial conversion premium.
A second source said that he thought the vol. could be higher, which would make the deal a little cheaper. But a third source concurred with 35% vol.
Some said the deal would have to come on the cheap end of talked terms, but one source said, “We’ve seen deals like this come fair and get done since the play is in the stock.”
Recent convertible issues of related companies were lower in the secondary market on the back of the LinkedIn deal, including Yahoo! Inc., Red Hat Inc., Citrix Systems Inc. and Twitter Inc., a New York-based trader said.
Elsewhere, energy names were mostly quiet although shares of many coal producers and E&P companies were surging in the early going.
The U.S. midterm elections, which will put Republicans at the helm of both the House of Representatives and the Senate, may bode well for energy, particularly coal names, a New York-based trader said.
While coal is a possible beneficiary, “there’s still the EPA and a systemic downturn anyway,” the trader cautioned.
Traders were also looking at Tesla Motors Inc., which was expected to report third-quarter earnings after the market close. Sales, or deliveries, figures will be in focus. The company has said that third-quarter deliveries will reach 7,800 cars.
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