GEO exchangeables trade up on debut; Expedia, MicroStrategy gain; Everbridge active

By Abigail W. Adams

Portland, Me., Feb. 19 – The last new convertible bond deal of the week entered the secondary space on Friday.

GEO Corrections Holdings Inc. priced $200 million of five-year notes exchangeable for the GEO Group Inc.’s shares after the market close on Thursday.

The new paper skyrocketed on an outright and dollar-neutral basis on its aftermarket debut.

GEO’s offering pushed new deal volume for the week to $2 billion, which priced over three deals.

While new deal activity has been relatively light in the midst of earnings, the pipeline is robust and new deal activity is expected to pick up as companies exit earnings season blackouts, sources said.

Meanwhile, Expedia Group Inc.’s 0% convertible notes due 2026 and MicroStrategy Inc.’s 0% convertible notes due 2027 remained active with both issues continuing to improve.

Outside of recent issues, Everbridge Inc.’s 0.125% convertible notes due 2024 were active with the notes jumping outright but contracting slightly dollar-neutral as stock skyrocketed following its earnings report.

GEO trades up

GEO Corrections Holdings priced $200 million of five-year notes exchangeable for the GEO Group’s shares after the market close on Thursday at par with a coupon of 6.5% and an initial exchange premium of 25%.

Pricing came at the cheap end of talk for a coupon of 6% to 6.5% and an initial exchange premium of 20% to 25%, according to a market source.

The new paper made large gains on an outright and dollar-neutral basis.

The 6.5% notes were marked at 103.75 bid, 104.25 offered with stock flat early in the session, a source said.

They were changing hands at 104.25 versus a stock price of $7.28 heading into the market close.

They were seen expanded 4.75 points dollar-neutral heading into the market close, a source said.

The small issue was active with more than $43 million in reported volume during Friday’s session.

The offering from GEO was unique.

“It was a weird deal from a weird company,” a source said.

The correctional facilities-focused real estate investment trust is a controversial company from a controversial sector.

StoneX Group Inc. was the underwriter for the offering, marking their first convertible bond deal, according to the Prospect News database.

The notes were marketed with assumptions of 1,300 bps over Libor and a 35% vol., which looked more than 15 points cheap at the midpoint of talk, sources said.

“It was a really great deal and it’s still so cheap,” a source said.

While the company’s common stock carries a yield of more than 11%, the convertible notes have dividend protection with additional interest paid based on the dividend paid on its common.

GEO’s stock traded to a high of $7.54 and a low of $7.22 before closing the day at $7.30, a decrease of 1.08%.

Upward momentum

New paper from Expedia and MicroStrategy remained in focus on Friday with both issues continuing to improve.

Expedia’s 0% convertible notes due 2026 rose to a 107-handle on Friday.

They were changing hands at 107.625 versus a stock price of $159.125 heading into the market close.

The notes expanded 0.375 point about one hour into the session and gained 0.75 point dollar-neutral heading into the market close, sources said.

They reached a new high on a dollar-neutral basis on Friday, a source said.

The notes continued to dominate activity in the secondary space with $158 million in reported volume during Friday’s session.

Expedia’s stock traded to a high of $162.10 and a low of $157.13 before closing the day at $158.92, an increase of 1.4%.

MicroStrategy’s 0% convertible notes due 2027 were also improved as stock gained traction after selling off over the course of the week.

The 0% convertible notes were changing hands at 102.875 early in the session. They rose to 104.375 heading into the market close.

The notes were seen expanded about 0.5 point dollar-neutral early in the session, a source said.

The bonds saw $36 million in reported volume during Friday’s session.

Underwriters recently fully exercised the $150 million greenshoe on the notes lifting the total size of the issue to $1.05 billion.

MicroStrategy’s stock traded to a high of $1,008 and a low of $914.59 before closing the day at $963.72, an increase of 3.87%.

Everbridge’s earnings

Everbridge’s 0.125% convertible notes due 2024 were active with the notes jumping outright but contracting dollar-neutral as stock soared following earnings.

The 0.125% notes gained about 20 points outright with stock up more than 30% in intraday activity.

The 0.125% notes were changing hands at 158 versus a stock price of $161.10 heading into the market close.

However, the 0.125% notes were seen slightly contracted early in the session with stock at its intraday peak, a source said.

There was more than $19 million in reported volume during Friday’s session.

Everbridge’s stock traded to a high of $178.98 and a low of $155.38 before closing the day at $160.89, an increase of 14.52%.

Stock soared after the software company reported fourth-quarter earnings, which beat on both the top and bottom lines.

Everbridge reported earnings per share of 3 cents, which beat analyst expectations for earnings of 2 cents.

Revenue was $75.6 million versus analyst expectations for revenue of $72.5 million.

Mentioned in this article:

Expedia Group Inc. Nasdaq: EXPE

Everbridge Inc. Nasdaq: EVBG

GEO Group Inc. NYSE: GEO

MicroStrategy Inc. Nasdaq: MSTR

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