Impinj upsizes convertibles, tightens talk; Chegg tanks outright, expands dollar-neutral

By Abigail W. Adams

Portland, Me., Nov. 2 – The first new convertible bond deal of the month is set to price after the market close on Tuesday, and demand for the new paper was heavy.

Impinj Inc. upsized its offering of six-year convertible notes and tightened talk as a result of the crowded books.

The refinancing deal looked cheap based on initial price talk, which was most likely done in an effort to entice holders to swap out of their deep-in-the-money 2% convertible notes due 2026, a source said.

Meanwhile, earnings-related volatility continued to spark activity in the secondary space with Chegg Inc.’s convertible notes dominating the tape.

While Chegg’s convertible notes tanked on an outright basis alongside stock, they saw a large dollar-neutral expansion on hedge.

Twitter Inc.’s 0.25% convertible notes due 2024 also saw heavy volume during Tuesday’s session although sources were unsure of what sparked the trading activity.

Impinj in demand

Impinj’s offering of six-year convertible notes was in demand during bookbuilding with the deal upsizing and price talk tightening.

Impinj plans to price an upsized $250 million, from $225 million, offering of six-year convertible notes with talk revised to a coupon of 1% to 1.25% and a fixed initial conversion premium of 42.5%, according to a market source.

Initial talk was for a coupon of 1.25% to 1.75% and an initial conversion premium of 37.5% to 42.5%, according to a market source.

The deal was heard to be in the market with assumptions of 475 basis points over Libor and a 42% vol., a source said.

Using those assumptions, the deal looked 1.4 points cheap at the midpoint of initial talk.

Proceeds from the refinancing deal will be used to repurchase for cash a portion of the company’s 2% convertible notes due 2026 in privately negotiated transactions.

Impinj priced an $86.25 million issue of the 2% notes at par in December 2019. The small, illiquid issue is deep-in-the-money and rarely trades, a source said.

Prior to Tuesday’s session, the 2% notes last traded on Oct. 13 at 169 when stock was $52.33.

Stock has skyrocketed over the last two weeks and closed Tuesday’s session at $78.02, an increase of 7.29%.

“No wonder they want to take out the old ones,” a source said.

The cheapness of the new deal was most likely an effort to entice holders to swap the 2% notes for the new issue, which carried a higher premium.

The 2% notes saw some scattered trades early Tuesday and were changing hands at 226.45. It was unclear whether the trading level was the takeout price.

Chegg’s earnings

Chegg’s convertible notes were in focus on Tuesday with stock nearly cut in half after the education technology company’s earnings report.

The 0.125% convertible notes due 2025 were down about 12 points outright in high-volume activity.

The notes were changing hands at 102.185 versus a stock price of $35.38 early in the session.

They continued to trade off and were down to par heading into the market close.

While the notes tanked on an outright basis, they expanded 2.5 points dollar-neutral on the move down.

Chegg’s 0% convertible notes due 2026 shaved off more than 13 points outright.

They were changing hands at 81.875 versus a stock price of $35.44 early in the session.

The 0% notes continued to hold around 82 heading into the afternoon, despite the continued decline of stock.

They expanded about 1.5 points dollar-neutral.

With a yield of about 4.2%, the 0% notes may have found their bond floor, a source said.

Chegg’s convertible notes “took up a lot of people’s bandwidth today,” with each issue seeing more than $100 million in volume, a source said.

The notes were on a delta of 80 heading into Tuesday’s session but were now on a 45 delta, a source said.

Chegg’s stock traded to a high of $39.34 and a low of $31.97 before closing the day at $32.12, a decrease of 48.75%.

Chegg reported earnings per share of 5 cents versus analyst expectations for earnings per share of 19 cents.

Revenue was $171.9 million versus analyst expectations of $173.9 million.

The company reported a steep decline in subscribers and warned of a slow-down in the education industry.

Twitter active

Twitter’s 0.25% convertible notes due 2024 were also active during Tuesday’s session although it is unclear what sparked the trading activity.

The 0.25% notes were largely moving in line with stock.

They were changing hands at 119.5 versus a stock price of $54.39 early in the session.

They continued to trade lower as stock dropped off and were changing hands at 118.75 in the late afternoon.

There was more than $15 million in reported volume.

Twitter’s stock traded to a high of $55.08 and a low of $53.78 before closing the day at $53.99, a decrease of 2.03%.

Mentioned in this article:

Chegg Inc. NYSE: CHGG

Impinj Inc. Nasdaq: PI

Twitter Inc. NYSE: TWTR

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