Shift Technologies convertibles on deck; Zscaler, Palo Alto in focus; Coinbase wavers

By Abigail W. Adams

Portland, Me., May 24 – The convertibles primary market launched one small offering prior to the market open on Monday.

Shift Technologies Inc. plans to price $75 million of five-year convertible notes after the market close on Monday.

While the deal looked cheap, it was small and played to a limited audience, sources said.

Quotient Ltd. also announced the sale of $95 million 4.75% convertible notes due 2026 with an initial conversion premium of 27.5% early Monday.

The offering was private and marketed to QIBs, including funds managed by Highbridge Capital Management LLC, according to a company news release.

The deal was not a standard Rule 144A offering. However, the company’s stock saw high volume during Monday’s session as if market players intended to trade the notes on hedge, a source said.

While no other offerings launched on Monday, more new deal activity is expected over the course of the week if market conditions remain strong.

After a choppy week the previous week, equity benchmarks were strong on Monday with the Dow Jones industrial average closing the day up 186 points, or 0.54%, the S&P 500 index up 0.99% and the Nasdaq Composite up 1.41%.

However, activity in the secondary space remained muted with $50 million on the tape about one hour into the session and $353 million in reported volume about one hour before the market close.

Zscaler Inc.’s and Palo Alto Networks Inc.’s convertible notes were among the top traded in the secondary space on Monday with cybersecurity companies returning to favor with investors on the heels of the Colonial Pipeline hack and a recent executive order to strengthen the cybersecurity of government networks.

While volume petered off as the session progressed, Coinbase Global Inc.’s 0.5% convertible notes due 2026 were active early in the session with the notes wavering around their discounted issue price.

Shift Technologies eyed

Shift Technologies plans to price $75 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 4.5% to 5% and an initial conversion premium of 25% to 30%, according to a market source.

The small offering looked cheap and was optically very attractive.

While it was unclear what underwriters were using, the deal modeled 12.625 points cheap at the midpoint of talk using assumptions of 750 basis points over Libor and a 40% vol., a source said.

However, due to its size, the offering will play to a limited audience, sources said.

Cybersecurity in focus

The convertible notes of cybersecurity firms were in focus on Monday as investors become bullish on cybersecurity companies’ stocks.

Zscaler’s 0.125% convertible notes due 2025 returned to focus with the notes among the top traded in the space on Monday.

The 0.125% notes were up about 3 points outright with stock up 2.5%.

The 0.125% notes were changing hands at 135.25 versus a stock price of $175.57 in the late afternoon.

There was more than $12 million in reported volume.

Zscaler’s stock traded to a high of $175.95 and a low of $172.14 before closing the day at $174.40, an increase of 2.54%.

Palo Alto’s 0.375% convertible notes due 2025 were also active with the notes trading just shy of 134 in the late afternoon.

There was more than $11 million in reported volume.

Palo Alto’s stock traded to a high of $370 and a low of $359.07 before closing the day at $364.52, an increase of 0.55%.

The convertible notes from the two cybersecurity companies were active as investors turn bullish on cybersecurity stocks.

With the recent Colonial Pipeline hack and president Joseph Biden’s executive order, signed on May 12, committing to increase the cybersecurity of government networks, investors have zeroed in on cybersecurity firms due to the opportunity for growth.

Coinbase volatile

While activity declined as the session progressed, Coinbase’s 0.5% convertible notes due 2026 were active early in the session with the notes popping above their discounted issue price.

However, the notes came in as the session progressed and closed the day underwater on an outright basis.

The 0.5% convertible notes, which priced at 99, were changing hands at 99.75 versus a stock price of $225.05 early in Monday’s session, according to a market source.

However, they gave back their outright gains as the session progressed and closed the day at 98.625.

Coinbase’s stock traded to a high of $231 and a low of $224.04 before closing the day at $225.30, an increase of 0.42%.

Coinbase’s stock remained volatile alongside the cryptocurrency that trades on its platform.

Bitcoin saw a volatile weekend with the cryptocurrency again plummeting to $31,000.

However, Bitcoin rebounded on Monday and shot up to $39,660, an increase of more than 15%, at the close of equity markets.

Mentioned in this article:

Coinbase Global Inc. Nasdaq: COIN

Palo Alto Networks Inc. NYSE: PANW

Quotient Ltd. NYSE: QUOT

Shift Technologies Inc. Nasdaq: SFT

Zscaler Inc. Nasdaq: ZS

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