MongoDB on tap; Wix.com trades down, holds dollar-neutral; semiconductor converts active

By Abigail W. Adams

Portland, Me., June 25 – While the convertibles secondary space was quiet on Monday, the primary market was active with a new deal in the works.

MongoDB, Inc. plans to price $200 million of six-year convertible notes after the market close on Monday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The company is young, making valuation difficult, sources said. However, the deal was pegged between 1 and 4 points cheap based on the assumptions used.

As the market eyed the new deal in the works, trading volume was light in the convertible secondary space with equity markets “getting cracked,” a source said.

The Dow Jones industrial average closed the day down 328 points. Industry sectors down across the board. With markets down, “converts tend to not react,” the source said.

However, Wix.com Ltd’s newly priced 0% convertible notes due 2023 were active on the tape on their second day in the market.

While the new notes were down outright, they were holding their expansion dollar-neutral, sources said.

Chipmakers were also in focus as the semiconductor sector took a hit on Monday.

Micron Technology Inc.’s 3% convertible notes due 2043, Microchip Technology Inc.’s 1.625% convertible notes due 2025 and Intel Corp.’s 3.25% convertible notes due 2039 were also active on the tape and trading down alongside their stocks.

MongoDB eyed

Valuation of MongoDB’s $200 million offering of six-year convertible notes is complicated by the relative youth of the company, sources said.

MongoDB “hasn’t been around that long,” a source commented.

The New York-based developer of an open-source database platform went public in October 2017.

“They haven’t filed enough quarterlies to see if their guidance is reliable,” another source said.

Without an established credit profile to draw from or a long trading history to judge volatility, “it seems like people are putting their finger in the air” with the assumptions, a market source said.

However, the deal was modeling cheap on the assumptions used, sources said.

With a credit spread of 350 basis points over Libor and a 45% vol., sources pegged the deal 1 point to 1.6 points cheap.

With a credit spread of 300 bps and a 42% vol., the deal modeled a little more than 4 points cheap at the mid-point of talk, a source said.

With 75 basis points on the borrow, the deal looked about 2.5 points cheap with those assumptions, another source said.

Another source pegged the deal about 2.9 points cheap with either assumptions.

MongoDB stock was $24 when the company went public. It has risen more than 145% since.

However, MongoDB stock was down alongside the broader markets on Monday. The shares closed the day at $53.40, a decrease of 6.22%.

Wix holds

Wix.com’s newly priced 0% convertible notes due 2023 were down on an outright basis on Monday but were holding onto their dollar-neutral expansion, a market source said.

The notes were down about 2 points outright to trade at 98.5 early in the session. The notes continued to trade down and were seen at 97.75 later in the afternoon.

While there was an odd-lot trade early in the session that was down about 1 point dollar-neutral, the majority of trades were in line, sources said.

“They’re holding onto their expansion,” the source said.

Wix.com stock traded to a high of $101.85 and a low of $96.50 before closing the day at $97.40, a decrease of 4.46%.

The new 0% convertible notes closed Friday at 100.5 and expanded about 2 points dollar-neutral on their debut, sources said.

Semiconductors down

With the secondary space quiet on Monday, large, liquid, equity-sensitive names from the tech sector returned to focus.

The convertible notes of several semiconductor companies were active on the tape and trading down alongside their stocks.

Micron’s 3% convertible notes due 2043 were down about 13 points outright to close the day at 182. Micron stock closed Monday at $53.14, a decrease of 6.94%.

About $8 million bonds were on the tape by late afternoon.

Microchip Technology’s 1.625% convertible notes due 2025 were down about 8 points outright to close the day at 180.4. Microchip stock closed Monday at $93.24, a decrease of 3.8%.

Intel’s 3.25% convertible notes due 2039 were down about 10 points outright to close the day at 244.5. Intel’s stock closed Monday at $50.71, a decrease of 3.41%.

Mentioned in this article:

Intel Corp. Nasdaq: INTC

Microchip Technology Inc. Nasdaq: MCHP

Micron Technology Inc. Nasdaq: MU

MongoDB, Inc. Nasdaq: MDB

Wix.com Ltd. Nasdaq: WIX

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