Proofpoint convertible jumps outright, on swap in active trade; Akamai adds outright

By Rebecca Melvin

New York, Aug. 21 – The convertibles market on Wednesday was focused primarily on trades of the new Proofpoint Inc. 0.25% convertibles, which traded up smartly after the Sunnyvale, Calif.-based cybersecurity company priced an upsized $800 million of the five-year notes at the rich end of coupon talk and midpoint of talk for the premium.

The new issue was a “a very nice deal indeed,” according to a New York-based sellsider.

Trading in the new issue dwarfed everything else in trade early in the session, but later in the day, other names showed up as U.S. stocks pulled smartly higher early in the session. However, equity market gains were trimmed after the minutes of the last U.S. Federal Reserve policy meeting were released, signaling that the central bank was divided on last month’s 0.25% cut in the Fed Funds rate and whether further rate cuts will occur going forward while policy makers strive to remain data dependent.

Bonds slipped on Wednesday and stocks and yields rose. The yield on the benchmark 10-year Treasury notes climbed to 1.58% while the 30-year bond traded at 2.06%.

Akamai Technologies Inc.’s $1 billion of 0.375% eight-year notes, which priced last week, traded up nearly 2 points on an outright basis on Wednesday to nearly 113. Shares of the Cambridge, Mass.-based cloud services company lifted more than $2.00, or 2.6%, to $88.87.

The Akamai notes dropped well below par on an outright basis on their debut last Wednesday.

While mandatories overall were relatively quiet, Southern Co., which priced $1.5 billion of three-year equity units after the market close on Aug. 13, were still active.

That issue continues to be a top volume leader among mandatory issues along with NextEra Energy Inc.’s 6.123% mandatory convertible equity units, which mature Sept. 1.

Proofpoint jumps on debut

The new Proofpoint convertible was seen printing as high at 104.63 on an outright basis, a New York-based market source said, citing Trace data. Another market source said a late-morning trade was 102 5/8 bid, 103 1/8 offered versus the closing stock price of $111.99, equating to a 2.75-point to 3-point gain on swap.

The volume of the new Proofpoint convertible dwarfed everything else in trade early Wednesday, the first market player said.

The note presented an excellent entry point for investors after the stock fell on Tuesday. The stock has subsequently rebounded, the source said. The stock was last up $5.61, or 5%, at $117.60.

Despite the strong showing, there wasn’t follow through heard among issuers and no new deals were heard to be announced during or after the session.

The Proofpoint 0.25% five-year convertible bonds priced after the market close on Tuesday at par with an initial conversion premium of 37.5%.

The notes were talked to yield 0.25% to 0.75% with an initial conversion premium of 35% to 40%, according to market sources.

The Rule 144A offering was upsized from an expected $750 million deal size.

There is a $120 million greenshoe, which was increased from $112 million.

The joint bookrunners are Morgan Stanley & Co. LLC, BofA Securities Inc., Citigroup Global Markets Inc. and Wells Fargo Securities LLC.

The notes will be non-callable until Aug. 20, 2022 and then provisionally callable at par if shares rise to 130% of the conversion price for at least 20 out of 30 consecutive trading days.

The bonds will be settled in cash, shares or a combination of cash and shares.

The proceeds are expected to be used for general corporate purposes, including potential acquisitions and strategic transactions.

A portion of the proceeds is being used to pay the cost of capped call transactions that Proofpoint entered into with one or more initial purchasers of the notes or their affiliates. The cap price of the capped call transactions will initially be $223.98 per share, which represents a premium of approximately 100% over the last reported sale price of Proofpoint’s common stock.

Mentioned in this article;

Akamai Technologies Inc. Nasdaq: AKAM

NextEra Energy Inc. NYSE: NEE

Proofpoint Inc. Nasdaq: PFPT

Southern Co. NYSE: SO

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