ImmunoGen shares hammered after deal launch; LinkedIn settles in; Twitter remains active

By Rebecca Melvin

New York, June 14 – ImmunoGen Inc.’s shares traded down sharply on Tuesday after the company’ late-Monday launch of a $100 million offering of five-year convertible senior notes which was expected to price after the market close.

“The stock getting hammered today was one the things that we thought was significant and indicates that hedge funds were getting positions,” a New York-based trader said.

Shares of the Waltham, Mass.-based biotechnology company started the session lower and selling accelerated into the market close, sending the stock down $1.46, or 29.5%, at $3.49. Volume was 20.1 million shares changing hands compared to daily average volume of 1.4 million, the trader noted.

There didn’t appear to be a gray market in the bond ahead of final terms being fixed and given “what the stock chart looked like, it would be tough to make a gray market trade,” the trader said.

“It will be interesting to see how this prices,” he added.

LinkedIn Corp.’s convertibles saw some carry-over trading action from Monday. Those bonds seem to have settled in around 99, a trader said, after jumping in very active trade on Monday on news that Microsoft Corp. agreed to buy the professional-oriented social media site for about $26.2 billion, or $196 per share, representing a 50% premium to LinkedIn’s share price ahead of the announcement.

“They seem to have settled in and without a deal break you should get par back on the bonds that prior to had been 94. So that’s not so bad,” the trader said.

Twitter Inc.’s convertibles were steady in fairly active trading after rising on Monday on the LinkedIn M&A news, which 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.

Otherwise, trading in the convertibles market was generally light.

Nuance Communications Inc.’s 1% convertibles due 2035 changed hands amid news that the Burlington, Mass.-based voice and language services company was pricing a $300 million offering of eight-year senior notes Tuesday. Early guidance had the deal coming to yield in the 5.75% area and it priced with a 6% coupon. The Nuance convertibles traded lower by about 0.9 point to 89 during the session, with the company’s shares down 60 cents, or 3.5% at $16.25.

Softbank Group Corp.’s mandatory exchangeable into Alibaba Group Holding Ltd. is still in the scopes of market players as the paper remains 0.75 point below par on a dollar-neutral basis.

“It’s a huge deal that you can have very large positions in if you want and it’s very cheap. The question is, will that ever change,” an East Coast-based trader said. Softbank priced an upsized $5.5 billion of the mandatories on June 2.

In the broader markets, the major equity indexes were lower for a fourth straight session. The Nasdaq Composite index closed off by only 4.89 points, or 0.1%, at 4,843.55, after a 1% slide on Monday. The Dow Jones industrial average closed down 57.66 points, or 0.3%, at 17,674.82, and the S&P 500 stock index shed 3.74 points, or 0.2%, to 2,075.32.

A two-day U.S. Federal Reserve policy meeting was underway Tuesday, dampening investor appetite for major position changes ahead of the central bank’s assessment of the economy expected on Wednesday. No move on rates is expected but other central banks continue to ease and push yields lower.

ImmunoGen looks cheap

ImmunoGen planned to price $100 million of five-year convertible senior notes after the market close on Tuesday.

The stock was down 80 cents, or 16%, at late morning Tuesday at $4.15 and it closed the session down 29.5% at $3.49.

“It’s a weak profile anyway but there was a lot of trading of the stock and what happened to the price indicates hedge fund demand,” a trader said.

A second 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.

The underwriters went out with a Libor plus 1,200 bps credit spread, a second trader said.

The deal was talked to yield 4% to 4.5% with an initial conversion premium of 20% to 25%.

J.P. Morgan Securities LLC was bookrunner for the offering, which has a $15 million greenshoe.

The notes are non-callable with no puts. Upon conversion, holders of the bonds will receive shares of ImmunoGen stock. The notes have takeover and dividend protection.

Proceeds will be used for its operations including but not limited to clinical trial expenditures, including the manufacture of ImmunoGen’s experimental therapies, other research and development expenditures, and other corporate purposes, capital expenditures and for working capital.

ImmunoGen develops targeted cancer therapeutics using its proprietary antibody drug conjugate technology. Its lead product is Mirvetuximab soravtansine, which is being advanced to Phase 3 testing for certain forms of ovarian cancer.

Mentioned in this article:

Alibaba Group Holding Ltd. Nasdaq: BABA

ImmunoGen Inc. Nasdaq: IMGN

Nuance Inc. Nasdaq: NUAN

LinkedIn Corp. Nasdaq: LNKD

Softbank Group Corp. Japan: 9984

Twitter Inc. Nasdaq: TWTR

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