Morning Commentary: ImmunoGen shares hammered; deal looks cheap; Twitter remains active

By Rebecca Melvin

New York, June 14 – ImmunoGen Inc.’s planned $100 million of five-year convertible senior notes were not yet trading in the gray market early Tuesday but the company’s stock was taking a beating on the heels of the launch of the deal, an East Coast-based buysider said.

Pricing is expected after the market close Tuesday.

Shares of the Waltham-based biotechnology company were down 80 cents, or 16%, at $4.15.

The buysider said he hadn’t yet looked at the new paper in terms of valuation. The price talk for the new bond is for a large 4% to 4.5% coupon and low initial conversion premium of 20% to 25%.

A New York-based trader said that the deal valued at about 101.875 at the midpoint of price talk using a credit spread of 1,500 basis points over Libor, 45% vol. and a slightly off top rate borrow.

“It has a small market cap, not a lot of revenue and is burning cash,” the trader commented.

Back in established issues, Twitter Inc.’s convertibles were steady in fairly active trade after rising on Monday on news that Microsoft Corp. agreed to acquire LinkedIn Corp. The M&A news rekindled speculation that Twitter is a ripe takeover candidate.

The Twitter 0.25% convertibles due 2019 remained around 89.5 bid, 90 offered in the early going and the Twitter 1% convertibles due 2021 traded little changed around 86, according to Trace data.

Twitter shares were up another 39 cents, or 2.7%, at $14.94 after rising 3.8% on Monday.

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