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Morning Commentary: Chegg upsizes offering, expands on market debut; Tesla trades down
By Abigail W. Adams
Portland, Me., March 29 – Chegg Inc.’s upsized offering of 0.25% convertible notes due 2023 were expanding on their market debut on Thursday.
The new convertible notes were seen up about 1 point dollar neutral right out of the gate, a market source said.
Chegg priced $300 million of five-year convertible notes after the market close on Wednesday with a coupon of 0.25% and an initial conversion premium of 32.5%.
Pricing came within talk for a coupon 0% to 0.5% and at the rich end of talk for an initial conversion premium of 27.5% to 32.5%.
The deal was “well oversubscribed and upsized by 20%,” a market source said. The initial size of the deal had been $250 million. “It was a highly successful offering,” the source said.
The deal was in line with several of the recent tech deals attracting both hedge and long only accounts. It came with a call spread and a share buyback.
Chegg used $20 million of the proceeds from the offering to repurchase 983,284 shares of its common stock.
Approximately $34.1 million of the proceeds will be used to cover capped call transactions.
In other market activity, Tesla Inc.’s three tranches of convertible notes continued to trade down on an outright basis. All three tranches were down about 1 point outright in early trading Thursday.
Tesla’s 0.25% notes due 2019 were seen trading in the 98.5 range. Tesla’s 1.25% convertible notes due 2021 were seen trading around 97. Tesla’s 2.375% convertible notes due 2022 were seen trading around 101.
Tesla stock was down to $257.27, a decrease of 0.2%, early in Thursday’s session.
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