Morning Commentary: Virgin Galactic prices, trades down outright, flat dollar-neutral

By Abigail W. Adams

Portland, Me., Jan. 14 – The first new deal of the year hit the convertibles secondary space on Friday as the volatility in equities continued.

Virgin Galactic Holdings Inc. priced $425 million of five-year convertible notes after the market close on Thursday at par at the cheap end of talk with a coupon of 2.5% and an initial conversion premium of 27.5%, according to a company news release.

Price talk was for a coupon of 2% to 2.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The deal became the latest offering to price off its 52-week low.

However, Virgin Galactic’s stock continued to trend lower on a weak open for equities, dragging the convertible notes down with it.

The convertible notes traded at 98 at the open, a source said.

However, the majority of trades were between 99.5 and par.

The notes were largely moving in line with stock and were flat on a dollar-neutral basis.

Virgin Galactic’s stock traded as low as $9.77 at the open but was changing hands at $9.90, a decrease of 1.2%, shortly before 11 a.m. ET.

While the S&P 500 index and the Nasdaq Composite briefly crossed into positive territory, selling pressure resumed in equities as the session progressed.

The Dow Jones industrial average was down 256 points, or 0.71%, the S&P 500 was down 0.31%, the Nasdaq Composite was down 0.05% and the Russell 2000 index was down 0.77% shortly before 11 a.m. ET.

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