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Morning Commentary: Pure Storage hits the market, expands on debut; secondary’s tone improves
By Abigail W. Adams
Portland, Me., April 5 – New paper from Pure Storage hit the market on Thursday after pricing in an overnight deal. The new 0.125% notes due 2023 expanded about 2 points dollar-neutral on their debut, a market source said.
Pure Storage priced an upsized $500 million in five-year convertible notes prior to the market open Thursday with a coupon of 0.125% and an initial conversion premium of 32.5%.
Pricing came at the midpoint of talk for a coupon of 0% to 0.25% and at the cheap end of talk for an initial conversion premium of 32.5% to 37.5%, according to a market source.
The new paper was “well received” on its market debut and was seen largely wrapped around 102 in active trading with the stock flat, a market source said.
J.P. Morgan Securities LLC, Deutsche Bank, Morgan Stanley & Co. Inc. and Barclays Capital Inc. are joint bookrunners for the Rule 144A deal, which carries an upsized greenshoe of $75 million.
The initial size of the deal was $450 million with a greenshoe of $67.5 million.
The deal was marketed with a credit spread of 225 bps and a 42% vol., a market source said. The deal came with a call spread and a share buyback.
The cap on the call spread is $39.66 per share, which represents a 100% premium of the last reported sales price of stock on April 4 from the company’s perspective.
The company will also repurchase $20 million, or 1,008,573 shares, of its common stock.
While trading volume outside of Pure Storage remained light, the secondary market looked firm on Thursday with the rebound in equities.
There is caution in the market with some backup in rates but the overall tone is good, a market source said.
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