‘Soft tape’ in convertibles space; Chegg maintains strength; recent deals below par

By Abigail W. Adams

Portland, Me., April 2 – Trading volume in the convertibles space was light during Monday’s session with only about $170 million on the tape by the late afternoon, according to a market source.

Most industries were down, as the Dow Jones industrial average closed the day down 459 points.

“Things are feeling pretty soft today,” a market source said.

The low trading volume was attributed to the drop in equity and the Easter Monday holiday in Europe. “A lot of European accounts are not in today,” a market source said. “They drive the bus with a lot of the investment-grade names.”

While dominating the secondary market on their debut on March 29, Chegg Inc.’s recently priced 0.25% convertible notes due 2023 were slow to trade on Monday.

While only small block trades were seen, the 0.25% convertible notes maintained their strength even as the rest of the market was down.

Live Nation Entertainment Inc.’s recently priced 2.5% convertible notes due 2023 were among the top volume movers of Monday’s session with the notes dropping below par for the first time since hitting the market on March 16.

GSV Capital Corp.’s recently priced 4.75% convertible notes due 2023 also dropped below par in scattered trading during Monday’s session.

Insmed Inc.’s 1.75% convertible notes due 2025 continued to contract on Monday despite the Bridgewater, N.J.-based biotech company’s submitted application to the U.S. Food and Drug Administration for a first of its kind treatment of a rare lung disease.

While a down day across the board, Senseonics Holdings, Inc.’s 5.25% convertible notes due 2023 were one of the few gainers.

The 5.25% convertible notes from the Germantown, Md.-based biotech company rose about 5 points outright after a favorable ruling from the FDA on its Eversense system, an implantable glucose monitoring system.

Chegg stays strong

While there was not much trading of Chegg’s new 0.25% convertible notes due 2023 on Monday, the new notes maintained their strength their second day in the market.

The 0.25% notes were seen trading around 102 with stock down 1.89% early in the session. “They’re still performing well,” 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%. The notes expanded about 1.75 points on their market debut Thursday.

Below par

Live Nation’s recently priced 2.5% convertible notes due 2023 were among the top volume movers of Monday’s session with the notes dropping below par as stock dropped more than 9%.

The notes were down about 3 points outright and were seen trading at 97.86 versus an equity price of $38.05 late in the afternoon, according to a market source. About $16 million of bonds were in play during Monday’s session.

Live Nation stock closed Monday at $38.17, a decrease of 9.42%.

News broke over the weekend that the U.S. Department of Justice is looking into allegations the Los Angeles-based events promoter and concert operator is in possible violation of antitrust laws.

Competitor AEG has claimed that concert venues were threatened with punitive action if they did not contract with Live Nation subsidiary Ticketmaster for ticket sales, the New York Times reported.

Live Nation priced $500 million of the convertible notes after the market close on March 15 to yield 2.5% with an initial conversion premium of 50%. The greenshoe was later fully exercised, lifting the size of the deal to $550 million.

GSV Capital’s small offering of 4.75% convertible notes due 2023 was also seen below par in scattered trading during Monday’s session.

The new notes were seen trading at 99.75 versus an equity price of $7.47, according to a market source.

GSV stock closed Monday at $7.22, a decrease of 4.24%. The Woodside, Calif.-based closed-end management investment company priced $40 million of the 4.75% notes on March 23.

Insmed contracts

Insmed’s struggling 1.75% convertible notes due 2025 continued to struggle during Monday’s session, despite recently submitting a New Drug Application to the FDA for approval. The notes were down about 3 points outright on Monday.

They were seen trading at 86.175 versus an equity price of $20.61. The notes were contracted about 0.25-point dollar neutral, a market source said.

Insmed stock closed Monday at $21.04, a decrease of 6.57%.

Insmed’s 1.75% convertible notes have struggled since hitting the market in late January spending much of their existence in the low 90s. With trades between 85 and 87, Monday’s session marked the lowest outright prices for the notes to date, according to Trace data.

Insmed submitted a New Drug Application to the FDA for ALIS, a treatment for the rare Nontuberculous Mycobacterial lung disease, in the final days of the fiscal quarter.

Proceeds from the convertible note offering are being used to support the regulatory approval and commercialization of the ALIS treatment, which it hopes to launch by the end of 2018.

Analysts are predicting a negative earnings per share of 76 cents for the current fiscal quarter.

Senseonics gains

While most of the market was down, Senseonics’ 5.25% convertible notes due 2023 saw gains on an outright basis in small volume trading during Monday’s session.

The notes climbed about 5 points outright to trade at 112, a market source said. Senseonics stock closed Monday at $3.10, an increase of 3.33%.

Monday was the first trading day since Senseonics announced the favorable outcome from the FDA advisory committee on its Eversense implantable glucose monitoring system.

The biotech company announced on March 29 that the FDA advisory panel voted unanimously that the Eversense system is safe and effective.

Senseonics priced a small $50 million offering of the 5.25% convertible notes in late January to support the commercialization of Eversense.

Mentioned in this article:

Chegg Inc. NYSE: CHGG

GSV Capital Corp. Nasdaq: GSVC

Insmed Inc. Nasdaq: INSM

Live Nation Entertainment Inc. NYSE: LYV

Senseonics Holdings, Inc. NYSE: SENS

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