Fisker convertibles struggle on secondary market debut; Airbnb active post-earnings

By Abigail W. Adams

Portland, Me., Aug. 13 – New paper remained in focus on Friday with the last new convertible bond deal of the week hitting the secondary space.

Fisker Inc. priced an upsized $625 million of five-year green convertible notes after the market close on Thursday.

The notes struggled on an outright basis and stood poised to close the day well below par. However, they expanded slightly dollar-neutral.

Fisker’s offering brought the weekly total for new deal activity to $2.6 billion, which priced over three deals.

However, each deal saw a lackluster reception in the secondary space with those that were above water seeing only nominal gains.

“The last three deals didn’t do overwhelmingly well,” a source. “Maybe the next deals to come will be a little bit more buyer-friendly.”

Outside of new paper, Airbnb Inc.’s 0% convertible notes due 2026 saw heavy trading volume following the company’s earnings report although with little movement in price.

Fisker struggles

Fisker priced an upsized $625 million of five-year green convertible notes after the market close on Thursday at par with a coupon of 2.5% and an initial conversion premium of 30%.

Pricing came in line with revised talk for a fixed coupon of 2.5% and at the cheap end of talk for an initial conversion premium of 30% to 35%, according to a market source.

Revised talk widened from initial price talk for a coupon of 1.5% to 2% and an initial conversion premium of 40% to 45%.

The new paper struggled in the aftermarket despite the cheapness of the deal.

The new paper was volatile early in the session.

The 2.5% notes traded as high as 100.5 pre-market.

They traded as low as 98.375 and as high as 100.25 within the first hour after the market open, a source said.

They were trading below par shortly before 11 a.m. ET with the notes marked at 99.125 bid, 99.625 offered versus a stock price of $14.63.

The convertibles continued to trend lower as stock sold off as the session progressed.

The notes were marked at 97 bid, 97.75 offered heading into the market close.

However, for those that were able to hedge the notes against Fisker’s closing stock price of $15.15 on Thursday, the notes expanded about 0.5 point dollar-neutral, a source said.

The notes accounted for the lion’s share of trading activity in the secondary space. There was $69 million in reported volume in the late afternoon; total reported volume was $362 million.

Fisker’s stock traded to a high of $15.16 and a low of $14.07 before closing the day at $14.40.

With revised price talk, Fisker’s offering was valued about 14 points cheap based on underwriter’s assumptions of 500 basis points over Libor and a 45% vol., a source said.

But “clearly the market doesn’t think so,” another source said.

Assumptions for the credit “were very off,” the source said. The electric vehicle manufacturer’s credit spread was probably more like 1,000 bps over Libor.

Airbnb active

Airbnb’s 0% convertible notes due 2026 saw heavy volume following the company’s earnings report although with little movement in price.

The 0% notes were changing hands at 94 early in the session, a source said.

They climbed to a 95-handle heading into the market close.

While the notes made nominal gains on an outright basis, they were unchanged dollar-neutral, sources said.

Airbnb’s stock was volatile following earnings with stock launching the day with large losses but closing with gains.

Stock traded to a low of $144.51 before closing at a high of $152.76, an increase of 1.07%.

Airbnb reported a large earnings beat on both the top and bottom lines.

The company reported a loss per share of 11 cents versus analyst expectations for a loss of 48 cents.

Revenue was $1.34 billion versus analyst expectations for revenue of $1.26 billion. Revenue reflected a 300% increase year over year.

However, stock was volatile after the company warned about the Delta variant’s potential impact on future earnings.

Mentioned in this article:

Airbnb Inc. Nasdaq: ABNB

Fisker Inc. NYSE: FSR

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