Avalara, Cloudflare convertibles on tap; Upwork, Alphatec gain; Coinbase on the rise

By Abigail W. Adams

Portland, Me., Aug. 9 – The convertibles primary market opened the week in full force with two deals totaling $1.85 billion launching after the market close.

Cloudflare Inc. plans to price $1 billion of five-year convertible notes and Avalara Inc. plans to price $850 million of five-year convertible notes after the market close on Tuesday.

The terms for the deals were aggressive with both issuers eyeing 0% coupons.

Meanwhile, the secondary space was off to a slow start on Monday.

There was $57 million in reported trading volume about one hour after the market open and $293 million on the tape about one hour before the market close.

Equities were choppy on Monday with benchmarks wavering between gains and losses before closing the day mixed.

The Dow Jones industrial average closed the day down 106.66 points, or 0.3%, the S&P 500 index closed down 0.09%, the Nasdaq Composite closed the day up 0.16% and the Russell 2000 index finished down 0.58%.

Upwork Inc.’s newly priced 0.25% convertible notes due 2026 and Alphatec Holdings Inc.’s 0.75% convertible notes due 2026 remained in focus with the notes continuing to gain on an outright and dollar-neutral basis.

Coinbase Global Inc.’s 0.5% convertible notes due 2026 hit their highest outright level since pricing as stock soared on the eve of the cryptocurrency exchange’s earnings report.

The calendar

The convertibles primary market was open for business on Monday with two large offerings launching after the market close.

Cloudflare plans to price $1 billion of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 47.5% to 52.5%, according to a market source.

Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are joint bookrunners for the Rule 144A offering, which carries a greenshoe of $150 million.

Proceeds will be used, in part, to exchange up to $400 million of the principal amount of the company’s 0.75% convertible notes due 2025 for cash and stock.

Avalara plans to price $850 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 42.5% to 47.5%, according to a market source.

Goldman Sachs, BofA Securities Inc. and Citigroup Global Markets Inc. are joint bookrunners for the Rule 144A offering, which carries a greenshoe of $127.5 million.

Day 2

Upwork’s 0.25% convertible notes due 2026 and Alphatec’s 0.75% convertible notes due 2026, the first new paper to hit the secondary in almost two weeks, remained in focus their second day in the secondary space with both continuing to improve.

Upwork’s 0.25% convertible notes were changing hands at 102.125 versus a stock price of $45.27 early in the session.

They continued to gain alongside stock as the session progressed and were improved about 0.125 point dollar-neutral, a source said.

Upwork’s stock traded to a high of $46.53 and a low of $44.39 before closing the day at $46.18, an increase of 2.92%.

Alphatec’s 0.75% convertible notes due 2026 were making large gains on an outright and dollar-neutral basis on Monday.

The notes rose to 104 in the late afternoon.

They expanded another 0.5 point dollar-neutral, a source said.

Alphatec’s stock traded to a low of $13.94 and a high of $14.90 before closing the day at $14.60, an increase of 4.21%.

Both Alphatec and Upwork saw strong aftermarket debuts last Friday with Upwork expanded 2 points and Alphatec expanded about 1 point dollar-neutral.

Coinbase gains

Coinbase’s 0.5% convertible notes due 2026 hit their highest outright level on Monday since pricing.

The 0.5% convertible notes jumped more than 4 points outright with stock up about 8%.

The notes, which priced at 99 in May, traded up to 109.75 in the late afternoon.

They expanded about 0.25 point dollar-neutral on the move up, a source said.

Coinbase’s stock traded to a high of $282.43 and a low of $267.50 before closing the day at $280.47, an increase of 8.6%.

Stock skyrocketed alongside the rising price of Bitcoin, which jumped to $46,358.35, an increase of 5.8%, shortly after 4 p.m. ET.

Bitcoin jumped on Monday as Congress hammered out a compromise to the cryptocurrency tax-reporting requirement contained in the infrastructure bill.

However, the amendment, which would have limited reporting requirements on cryptocurrency transactions over $10,000 to entities classified as traditional brokers, was defeated.

Coinbase is set to report earnings on Tuesday.

Mentioned in this article:

Alphatec Holdings Inc. Nasdaq: ATEC

Avalara Inc. NYSE: AVLR

Cloudflare Inc. NYSE: NET

Coinbase Global Inc. Nasdaq: COIN

Upwork Inc. Nasdaq: UPWK

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