Convertibles primary sees $3.26 billion on tap; WisdomTree adds on; Wix.com skyrockets

By Abigail W. Adams

Portland, Me., Aug. 11 – The convertibles primary market returned in full force after a nearly two-week hiatus with $525 million pricing in two deals after the market close on Monday and six deals totaling $3.26 billion on tap.

Wix.com Ltd. priced $500 million five-year convertible notes and WisdomTree Investments Inc. priced a $25 million tap of its 4.25% convertible notes due 2023 after the market close on Monday.

Wix.com’s new convertible notes dominated activity in the secondary space and skyrocketed on debut.

Wayfair Inc. is planning to price $1.2 billion, Perficient Inc. is planning to price $185 million and Omeros Corp. is planning to sell $200 million convertible notes after the market close on Tuesday.

Helix Energy Solutions Group Inc. also launched a $175 million offering of long five-year convertible notes after the market close on Tuesday.

Wells Fargo Securities LLC and Evercore ISI are joint bookrunners for the registered offering.

The mandatory space also saw some action with KKR & Co. Inc. planning to price $750 million, or 15 million shares, of $50-par three-year series C mandatory convertible preferred stock and American Electric Power Co. Inc. planning to price $750 million, or 15 million, three-year $50-par equity units after the market close on Tuesday.

The deals are the first mandatory offerings since early July.

All deals were heard to be doing well during bookbuilding.

Wix.com skyrockets

Wix.com sold $500 million five-year convertible notes after the market close on Monday at par with a coupon of 0% and an initial conversion premium of 45%.

Pricing came in line with revised price talk for a fixed coupon of 0% and an initial conversion premium of 45%.

Price talk tightened three times during bookbuilding, a source said.

Initial talk was for a fixed coupon of 0% and an initial conversion premium of 30% to 35%.

The deal from the cloud development platform played to massive demand, a source said.

The demand followed the notes into the secondary space with the 0% notes skyrocketing in the aftermarket.

They were trading between 102 to 103 with stock down more than 2% early in the session, a market source said.

The notes continued to gain on an outright basis and were seen changing hands at 103.375 in the late afternoon.

They expanded 3 points dollar-neutral, a market source said.

Wix.com stock traded to a high of $276.98 and a low of $264.72 before closing the day at $268.59, a decrease of 3.36%.

WisdomTree adds-on

WisdomTree Investments priced a $25 million tap of its 4.25% convertible notes due 2023 at 101 to yield 4.215%.

The notes will form a single unit with the 4.25% convertible notes due 2023 that were issued on June 16, lifting the total size of the offering to $175 million.

The 4.25% convertible notes made a significant recovery over the past two weeks.

They were trading in the low 90s but recently popped above par.

The notes were not active following the add-on, a source said.

Wayfair eyed

Wayfair plans to price $1.2 billion of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.625% to 1.125% and an initial conversion premium of 30% to 35%, according to a market source.

While it was unclear what underwriters were using, one source pegged assumptions as a credit spread of 600 basis points over Libor and a 45% vol.

Using those assumptions, the deal looked 2.75 points cheap at the midpoint of talk, the source said.

Another source saw assumptions as 400 bps over Libor and a 40% vol., which looked 7 points cheap at the midpoint of talk.

Evaluating the deal is complicated by the home decor e-commerce company’s dramatic rebound over the past few months.

The once struggling e-commerce company’s market cap has ballooned since March, a source said.

Wayfair hit its 52-week low of $21.70 on March 19. Wayfair stock closed Tuesday at $309.13, an increase of 3.73%.

The market cap is now “a monster,” at $30 billion, another source said.

The offering will be Wayfair’s fifth outstanding convertible issue.

Proceeds will be used to repurchase a portion of the 0.375% convertible notes due 2022 for cash in privately negotiated transactions.

The 0.375% notes traded to a low of 60 in mid-March.

However, the notes shot past triple par on Tuesday and changed hands as high as 305 in the midafternoon.

Wayfair priced a $431.25 million issue of the 0.375% notes in 2017.

Wayfair’s other convertible notes are also deep-in-the-money.

On deck

Perficient plans to price $185 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.125% to 1.625% and an initial conversion premium of 25% to 30%, according to a market source.

The deal looked the cheapest out of the five that were in the market on Tuesday, a source said.

Proceeds will be used in part to repurchase for cash a portion of the outstanding 2.375% convertible notes due 2023 in privately negotiated transactions.

The 2.375% convertible notes were changing hands at 127 early Tuesday, a source said.

Perficient priced a $143.75 million issue of the 2.375% notes in 2018.

Omeros plans to price $200 million of long five-year convertible notes after the market close on Tuesday with price talk for a coupon of 5% to 5.5% and an initial conversion premium of 22.5% to 27.5%, according to a market source.

The deal was optically very attractive, a source said.

Proceeds will be used in part to repurchase a portion of its 6.25% convertible notes due 2023 in privately negotiated transactions.

The 6.25% notes are an illiquid issue. They were last trading around 101.5 at the end of July, according to Trace data.

Omeros priced a $210 million issue of the 6.25% notes in 2018.

Concurrently with the convertible notes offering, the biopharmaceutical company plans to price a secondary stock offering of $125 million.

While the convertible notes were heard to be playing to healthy demand during bookbuilding, the secondary offering was struggling, a source said.

The mandies

After a little more than one month with no mandatory issuance, two deals are slated for after the market close – both with investment-grade ratings.

KKR plans to price $750 million, or 15 million shares, of $50-par three-year series C mandatory convertible preferred stock after the market close on Tuesday with price talk for a dividend of 5.75% to 6.25% and an initial conversion premium of 17.5% to 22.5%.

Proceeds, together with cash on hand, will be used to fund the acquisition of Global Atlantic Financial Group Ltd.

The shares will be callable if the acquisition is not completed by May 7, 2021.

S&P Global Ratings assigned the convertible preferred stock a BBB+ rating.

American Electric Power plans to price $750 million, or 15 million, three-year $50-par equity units after the market close on Tuesday with price talk for a dividend of 6.125% to 6.625% and a threshold appreciation premium of 17.5% to 22.5%.

The equity units consist of a common stock forward purchase contract and a 1/20 ownership interest in a par of $1,000 junior subordinated debenture due 2025.

S&P rated the equity units BBB.

While the units did not model well, they were heard to be playing to heavy outright demand, a source said.

The mandatory offerings are the first to price since II-VI Inc. priced a $400 million offering of three-year par of $200 series A mandatory convertible preferred stock on July 2.

Mentioned in this article:

American Electric Power Co. Inc. NYSE: AEP

Helix Energy Solutions Group Inc. NYSE: HLX

KKR & Co. Inc. NYSE: KKR

Omeros Corp. Nasdaq: OMER

Perficient Inc. Nasdaq: PRFT

Wayfair Inc. NYSE: W

WisdomTree Investments Inc. Nasdaq: WETF

Wix.com Ltd. Nasdaq: WIX

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