Fiverr eyed, looks cheap; GSK exchangeables tied to Theravance top par; K12 improves

By Abigail W. Adams

Portland, Me., Oct. 7 – The convertibles primary market returned to action on Wednesday after a more than week-long hiatus.

Fiverr International Ltd. is poised to be the first new deal of the fourth quarter.

The offering looked cheap and was in demand during bookbuilding, sources said.

While Fiverr broke the drought for new paper, not much more is expected in the next week or two, sources said.

With no new paper hitting the secondary space since Zogenix Inc.’s 2.75% convertible notes due 2027 on Sept. 25, liquidity was becoming problematic, a source said.

While there were huge movements in the stocks of convertible issuers as equity markets skyrocketed following Tuesday’s sell-off, it did not translate into heavy trading volumes.

There was about $45 million in reported convertibles trading volume one hour into the session and $424 million in reported volume about one hour before the market close.

GSK Finance No. 3 plc (GlaxoSmithKline plc)’s 0% exchangeable notes due 2023 (A2/A) tied to Theravance Biopharma Inc.’s stock were major volume movers on Wednesday.

While the notes were making gains, they were still trading well below their reoffer price.

Snap Inc.’s 0.25% convertible notes due 2025 were active after the company’s stock recently set a new 52-week high.

K12 Inc.’s 1.125% convertible notes due 2027 were improved in active trading on Wednesday although the notes were still well below par.

Fiverr in demand

Fiverr planned to price $400 million of five-year convertible notes after the market close on Wednesday with price talk for a fixed coupon of 0% and an initial conversion premium of 25% to 30%.

Underwriters were marketing the deal with assumptions of 375 basis points over Libor and a 42% vol., a source said.

Using those assumptions, the deal looked 5.4 points cheap at the midpoint of talk, a source said.

However, the borrow on the stock is “squishy” at best, a source said. While the borrow rate is not the best, it is also not the worst.

Assuming the worst borrow rate, another source saw the deal as 5 points cheap at the midpoint of talk.

With a 0% coupon, the deal is an equity surrogate that will appeal mostly to hedge accounts and equity focused outright accounts.

The Israeli-based online platform for freelance services was listed on the New York Stock Exchange in June 2019 with an IPO of $20.00.

Stock has since “taken off like a rocket,” a source said. Fiverr’s stock closed Wednesday at $152.55, a decrease of 1.17% on the day.

With the recent shortage of new paper and the deal looking cheap, it was in demand during bookbuilding and trading up several points in the gray market, sources said.

GSK exchangeables in focus

GSK’s 0% exchangeable notes due 2023 (A2/A) tied to Theravance Biopharma were in focus on Wednesday with the notes making gains as Theravance’s stock skyrocketed.

The 0% notes topped par after previously trading below, a source said.

They were changing hands at 101.625 in the late afternoon with $15 million in reported volume.

Theravance’s stock traded to a low of $14.52 and a high of $16.78 before closing the day at $16.39, an increase of 10%.

Theravance’s stock was recovering after hitting a new 52-week low of $14.48 on Oct. 1.

While the 0% exchangeable notes were improved on Wednesday, they were still trading well below their reoffer price.

GSK priced a $280 million issue of the 0% notes at 108.5 in June.

The deal was part of GSK’s effort to sell its stake in the company.

Snap active

Snap’s 0.25% convertible notes due 2025 were active although little changed after the social media and camera company’s stock hit a new 52-week high in intraday activity on Tuesday.

The 0.25% notes were changing hands at 141.875 in the late afternoon versus a stock price of $26.79, according to a market source.

There was more than $8 million in reported volume.

Snap’s stock traded to a high of $27.13 before closing the day largely flat at $26.67, a decrease of 0.22%.

Prior to the sell-off heading into Tuesday’s close, Snap’s stock hit a new 52-week high of $27.79 in intraday activity.

Stock has been on an upward trend over the past two weeks.

Several media reports have stated that the company is one of the leading social media platforms for U.S. teenagers.

Snap is scheduled to report earnings on Oct. 20.

K12 improves

K12’s 1.125% convertible notes due 2027 were improved in active trading on Wednesday.

While the notes were bouncing off their lows, they were still struggling.

The 1.125% convertible notes traded up 1.25 points to 88.625 in the late afternoon.

They gained about 0.5 point dollar-neutral.

“They’re coming up from the basement,” a source said.

K12’s stock traded to a low of $29.15 and a high of $30.25 before closing the day at $29.83, an increase of 2.58%.

The notes closed out the previous week on an 82-handle. However, they have gained alongside stock since Monday.

The 1.125% notes have struggled since pricing on Aug. 26.

However, they traded down to the low 80s in mid-September after the Miami-Dade School Board voted to terminate its contract with My School Online, a K12 program.

Mentioned in this article:

Fiverr International Ltd. NYSE: FVRR

K12 Inc. NYSE: LRN

Snap Inc. NYSE: SNAP

Theravance Biopharma Inc. Nasdaq: TBPH

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