Uber, MicroStrategy convertible offerings eyed; Uber tightens talk; NextEra active

By Abigail W. Adams

Portland, Me., Dec. 8 – The convertibles primary market was active with two deals set to price after the market close.

Uber Technologies Inc. plans to price $1 billion of five-year convertible notes, and MicroStrategy Inc. plans to price $400 million of five-year convertible notes.

Both deals were in demand during bookbuilding with Uber tightening talk.

Uber is a household name, and its debut convertible notes offering will help increase the profile of the asset class, sources said.

However, the notes modeled rich.

While MicroStrategy’s notes looked cheap, its use of proceeds was viewed as unusual.

However, the deal offered an interesting way for investors to play Bitcoin.

Meanwhile, the secondary space continued to see heavy trading volume as accounts prepared to close out a blockbuster year.

NextEra Energy Partners LP’s 0% convertible notes due 2025 were active early in the session with the notes continuing to trade well below their discounted reoffer price.

Dick’s Sporting Goods Inc.’s 3.25% convertible notes due 2025 were also active on Tuesday with the company’s stock on the verge of trading ex-dividend.

Uber tightens talk

In its debut appearance in the convertibles market, Uber plans to price $1 billion of five-year convertible notes after the market close on Tuesday.

The deal was in demand during bookbuilding with talk tightening to a fixed coupon of 0% and an initial conversion premium of 50% to 52.5%, according to a market source.

The deal is expected to price at the rich end of the revised talk.

Initial price talk was for a coupon of 0% to 0.25% and an initial conversion premium of 42.5% to 47.5%.

The deal was heard to be in the market with assumptions of 400 basis points over Libor and a 42% vol.

Using those assumptions, the deal looked 0.75 point rich at the midpoint of initial talk.

While the deal looked rich to some sources, others found the pricing reasonable given the market.

Uber is a household name. “Brand name matters,” a source said.

The stock is highly liquid, which will make the notes attractive to hedge players.

There are also some good credit metrics to support Uber’s valuation with the transportation technology company an issuer of high-yield debt and competitor DoorDash about to launch its IPO, a source said.

The deal comes as the transportation technology company announced it sold its autonomous-driving unit to Aurora Innovation Inc. for $400 million to increase shareholder profitability.

For Bitcoin

MicroStrategy plans to price $400 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 32.5% to 37.5%.

The deal was also in demand during bookbuilding with the initial conversion premium range widening out to 37.5% to 40%, a source said.

However, the offering is expected to price with a 37.5% premium.

The deal was heard to be in the market with assumptions of 550 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of initial price talk.

MicroStrategy plans to use proceeds to invest in Bitcoin, which is unusual, sources said.

However, the deal offers investors an interesting way to play the digital currency.

The CEO of the business intelligence company is a Bitcoin bull and, like many, believes the currency will become digital gold, a source said.

For those who are not so bullish on Bitcoin, the convertible notes offering gives investors a way to play the digital currency while still having some downside protection, the source said.

MicroStrategy’s stock has skyrocketed more than 273% over the past year. Its recent run has largely been due to its Bitcoin holdings, a source said.

Bitcoin closed Tuesday’s session at $18,732 for one coin.

NextEra trades down

NextEra’s 0% convertible notes due 2025 continued to struggle on Tuesday and dropped further below their discounted reoffer price.

The 0% notes were down another 0.25 point early in the session.

They were changing hands at 96 versus a stock price of $62.08.

While the notes were active early in the session, activity petered out as stock gained momentum heading into the afternoon.

NextEra’s stock traded to a low of $61.88 and a high of $64.81 before closing the day at $64.50, an increase of 3.95%.

Dick’s comes in

Dick’s Sporting Goods’ 3.25% convertible notes due 2025 were active on Tuesday with the sports retailer’s stock about to trade ex-dividend.

The 3.25% notes were largely flat on an outright basis with stock up more than 1%.

The notes were changing hands on a 175-handle early in the session and stood poised to close the day at 176.25.

Dick’s stock traded to a high of $56.36 and a low of $55.10 before closing the day at $56.12, an increase of 1.08%.

Stock will trade ex-dividend on Dec. 10. The sporting goods retailer announced a quarterly dividend payment of $0.313 in late November.

Mentioned in this article:

Dick’s Sporting Goods Inc. NYSE: DKS

MicroStrategy Inc. Nasdaq: MSTR

NextEra Energy Partners LP NYSE: NEP

Uber Technologies Inc. NYSE: UBER

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