Morning Commentary: Coupa’s upsized convertible notes hit the market, expand on debut

By Abigail W. Adams

Portland, Me., June 7 – The convertibles primary market rounded out an active week with Coupa Software Inc. pricing an upsized offering.

Coupa priced an upsized $700 million of six-year convertible notes after the market close on Thursday at par with a coupon of 0.125% and an initial conversion premium of 35%.

Pricing came at the cheap end of revised talk for a coupon of 0% to 0.125% and an initial conversion premium of 35%, according to a market source.

Initial price talk was for a coupon of 0.125% to 0.625% and an initial conversion premium of 30% to 35%.

The greenshoe was also upsized to $105 million.

The initial size of the deal was for $500 million with a greenshoe of $75 million.

While the deal looked cheap at the midpoint of initial price talk, it modeled out to fair value at the midpoint of revised pricing.

Despite this, the notes skyrocketed out of the gate.

The 0.125% notes were changing hands at 103 versus a stock price of $120 early in the session.

With a 72% delta, the notes were up about 2 points dollar-neutral, a market source said.

The 0.125% notes accounted for the lion’s share of trading volume early in the session.

Of the $216 million in reported volume on the tape about one hour after the opening bell, $169 million was Coupa’s new paper.

The San Mateo, Calif.-based cloud platform for business spend management is well-liked among investors, sources said.

Its stock has been on a straight upward trajectory.

Coupa priced a $230 million issue of 0.375% convertible notes due 2023 in January 2018.

While slow to trade early in Friday’s session, the bonds were changing hands just above parity at 268.5, a market source said.

Coupa stock was $121.05, an increase of 2.39%, shortly before 11 a.m. ET.

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