Lucid prices at discount, trades down; Everbridge tanks outright, expands on hedge

By Abigail W. Adams

Portland, Me., Dec. 10 – It was an active day in the convertible bond secondary space with Lucid Group Inc.’s $1.75 billion offering making its aftermarket debut and some outstanding issues seeing huge stock swings.

Lucid Group’s new 1.25% convertible notes due 2026 were “sloppy” in secondary action with the notes trading well below their discounted issue price and contracting on a dollar-neutral, or hedged, basis.

While new paper from Lucid dominated activity in the secondary space, Everbridge Inc.’s convertible notes were active with the notes tanking outright but expanding on a hedged basis as stock got slaughtered.

Meanwhile, the convertibles secondary space ended the week on strong footing despite the continued volatility in equities.

The convertibles secondary market was up 0.45% on the week through Thursday’s close, according to a Barclays report.

Equities were largely positive on Friday as the market digested the November Consumer Price index report, which recorded the fastest rising annual rate of consumer prices in nearly 40 years.

While inflationary figures remain elevated, the report was largely in line with market expectations.

The Dow Jones industrial average closed the day up 216 points, or 0.60%, the S&P 500 index notched a new record high and closed the day up 0.95%, and the Nasdaq Composite closed the day up 0.73%.

However, the Russell 2000 index underperformed on Friday and closed down 0.38%.

Lucid’s discount

Lucid priced $1.75 billion of five-year convertible notes after the market close on Thursday at 99.5 with a coupon of 1.25% and an initial premium of 50%, according to a market source.

Pricing came at the cheap end of talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 50% to 55%, according to a market source.

The discounted offer price was not included in initial price talk.

The new 1.25% convertible notes were trading below their discounted issue price on debut.

The notes traded in a range of 97 to 99 with stock volatile throughout Friday’s session, sources said.

The notes were changing hands between 97.75 and 98.5 out of the gate with stock up.

However, the notes moved lower as stock turned negative.

They were changing hands at 97 shortly before 11 a.m. ET with stock down about 1%.

However, the notes regained some footing and traded back up to a 98-handle as stock again turned positive.

The notes were seen contracted as much as 2 points dollar-neutral early in the session.

However, they pared their losses and were contracted about 1.5 points in the early afternoon.

The disappointing secondary market debut was not a surprise to sources.

The deal experienced pushback during bookbuilding with sources questioning the valuation of the electric vehicle manufacturer, which has been a public company for less than six months and produces no revenue.

The SPAC deal that brought the company public is also under investigation by the Securities and Exchange Commission, which was not addressed on the investor conference call.

The deal was marketed with a credit spread of 350 bps over Libor.

However, the notes were trading with an implied credit spread of 550 bps over Libor on their secondary market debut, a source said.

Lucid’s stock was volatile on Friday. Stock traded to a high of $39.08 and a low of $35.80 before closing the day at $37.66, an increase of 3.12%.

Everbridge sinks

Everbridge’s convertible notes were active and tanking on an outright basis as the Burlington, Mass.-based software company’s stock got slaughtered.

The 0% convertible notes due 2026 sank 20 points outright.

They were changing hands at 80.25 versus a stock price of $62.97 early in the session, sources said.

The notes continued to move lower as the session progressed and were changing hands on a 79-handle in the early afternoon.

On a hedge basis, sources saw the notes expanding 1 point to 2.5 points on the move down.

However, on a value basis the notes contracted about 4 points, a source said.

Everbridge’s 0.125% convertible notes due 2024 sank 30 points outright.

The notes traded down to 92 early in the session. They were changing hands around 93.5 in the late afternoon.

While the notes tanked outright, they improved 7 points to 8 points on hedge, a source said.

The large expansion was the result of the notes’ short-duration.

Everbridge’s stock traded to a high of $68.89 and a low of $57.58 before closing the day at $63, a decrease of 45.39%.

Stock tanked after the surprise resignation of the company’s CEO.

Stifel downgraded the company to hold from buy as a result of the departure.

Mentioned in this article:

Everbridge Inc. Nasdaq: EVBG

Lucid Group Inc. Nasdaq: LCID

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