Square convertibles down outright, up on swap; GFL Environmental lower; Omeros jumps

By Abigail W. Adams

Portland, Me., March 3 – Two new deals hit the convertibles secondary space on Tuesday as volatility continued to whipsaw markets.

Square Inc.’s newly priced convertible notes were trading well below par on their secondary market debut.

While the notes were making gains on a dollar-neutral basis in intraday trading, they closed the day flat, sources said.

Square’s 0.5% convertible notes due 2023 remained active with the notes trading down alongside stock.

GFL Environmental Inc. accelerated the timing of the pricing of its IPO and tangible equity units. However, the units were also underwater on debut.

While Tuesday was another ugly day for equities, Omeros Corp. was one of Tuesday’s few bright spots.

Omeros’ 6.25% convertible notes due 2023 jumped on an outright basis as stock soared following its fourth-quarter earnings report and positive data from one of its clinical trials.

Square below par

Square priced $1 billion of five-year convertible notes prior to the market open on Tuesday at par with a coupon of 0.125% and an initial conversion premium of 50%.

Pricing came at the midpoint of initial price talk for a coupon of 0% to 0.25% and an initial conversion premium of 47.5% to 52.5%, according to a market source.

The new paper dominated activity in the secondary space.

However, the notes were trading well below par on a volatile day for equities.

The new 0.125% notes were trading in a range of 98.875 to 99.5 early in the session.

They briefly made their way up to par but quickly dropped back to trade just north of 98 in the late afternoon.

While down outright, the notes were expanding on swap.

The notes were up about 0.375 point dollar-neutral in intraday trading, a market source said.

Another source saw them up 0.5 point dollar-neutral during Tuesday’s session.

However, the notes closed the day flat on swap.

Square’s 0.5% convertible notes due 2023 were again active on Tuesday.

The notes traded down another 3 points outright to 122.5 in the mid-afternoon.

Square stock traded to a high of $80.60 and a low of $75.81 before closing the day at $78.84, a decrease of 2.38%.

GFL underwater

GFL Environmental accelerated the timing of the pricing of its IPO and tangible equity units.

The units were initially slated to price after the market close on Tuesday.

However, GFL priced an upsized $775 million, or 15.5 million units, of $50-par three-year tangible equity units after the market close on Monday with a dividend of 6% and a threshold appreciation premium of 20%.

Pricing came at the midpoint of price talk for a dividend of 5.75% to 6.25% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

The greenshoe was also upsized to $116.25 million, or 2.325 million units.

The initial size of the offering was $700 million, or 14 million units, with a greenshoe of $105 million, or 2.1 million units.

The units priced concurrently with GFL’s IPO of 75 million shares, which priced at $19.00 per share, below the targeted range of $20.00 to $21.00.

While the equity units were oversubscribed during bookbuilding, they were trading off in the secondary space.

The units opened the day at $48.

They were changing hands around $47.65 in the late afternoon and closed the day at $47, sources said.

With no borrow on the stock until the deal settles, the units were trading outright, a market source said.

GFL stock closed Tuesday at $16.75.

Omeros jumps

Omeros’ 6.25% convertible notes due 2023 were one of the few bright spots of Tuesday’s session with the notes jumping on an outright basis as stock soared following its earnings report.

The 6.25% notes climbed more than 10 points outright. They were changing hands at 113.5 in the late afternoon, according to a market source.

The small illiquid issue, which is typically slow to trade, was active on Tuesday with more than $10 million in reported volume.

While the notes were posting gains on Monday in the run up to the company’s earnings report, they closed out last week below par.

Omeros stock traded to a low of $14.02 and a high of $19.74 before closing the day at $19.56, an increase of 55.36%.

Stock skyrocketed after Omeros reported better-than-expected revenue in its fourth-quarter earnings and positive data from a clinical trial.

Omeros reported revenue of $33.42 million in the fourth-quarter versus analyst expectations for revenue of $32.54 million.

Omeros also provided an update on its clinical trial for a treatment for HSCT-TMA with results exceeding the FDA threshold requirement, according to a company news release.

Mentioned in this article:

GFL Environmental Inc. NYSE: GFL

Omeros Corp. Nasdaq: OMER

Square Inc. NYSE: SQ

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