GEO exchangeables eyed; MicroStrategy, Expedia gains continue; Pioneer Natural active

By Abigail W. Adams

Portland, Me., Feb. 18 – After the onslaught of new paper early in the week, the convertibles primary market had one deal on the active calendar.

GEO Corrections Holdings Inc. plans to price $200 million of five-year notes exchangeable for the GEO Group Inc.’s shares after the market close on Thursday.

The deal was optically very attractive and looked double-digits cheap based on underwriters’ assumptions. However, the company’s sector was controversial, sources said.

Meanwhile, the secondary space was active with $122 million in reported volume about one hour into the session and $585 million about one hour before the market close.

Expedia Group Inc.’s 0% convertible notes due 2026 and MicroStrategy Inc.’s 0% convertible notes due 2027 remained active with both continuing to gain their second day in the secondary space.

Outside of recent issues, Pioneer Natural Resources Co.’s 0.25% convertible notes due 2025 were major volume movers although with little movement in price.

GEO eyed

GEO Corrections plans to price $200 million of five-year notes exchangeable for the GEO Group’s shares after the market close on Thursday with price talk for a coupon of 6% to 6.5% and an initial exchange premium of 20% to 22.5%, according to a market source.

The deal was being marketed with assumptions of 1,300 basis points over Libor and a 35% vol.

Using those assumptions, the deal looked 15.25 points cheap at the midpoint of talk, a source said.

In contrast to the recent trend, GEO’s exchangeable notes not only modeled cheap but carried optically attractive terms.

However, the common stock yield is 11.66%, which is most likely why the deal was priced so cheaply, a source said.

While the deal looked attractive, the correctional facilities-focused real estate investment trust is from an enormously controversial sector, a source said.

However, private correctional facilities do not necessarily fall into the sin stock category and have been popular with investors before, another source said.

The deal was mostly being marketed to high-yield accounts, a source said.

Day 2

New paper from Expedia and MicroStrategy continued to dominate the tape on Thursday with both continuing to see gains.

Expedia’s 0% convertible notes due 2026 were changing hands at 105.125 early in the session with stock off.

They rose to 106 as stock turned positive heading into the afternoon.

The notes were seen changing hands at 106.25 versus a stock price of $157.19 in the late afternoon.

The notes were among the most actively traded in the secondary space with $38 million in reported volume heading into the market close.

Expedia’s stock traded to a high of $157.41 and a low of $150.28 before closing the day at $156.73, an increase of 1.75%.

MicroStrategy’s new 0% convertible notes due 2027 were also making gains in active trading.

The notes gained about 1 point even as stock continued to trend lower during Thursday’s session.

They were changing hands at 102.5 versus a stock price of $940.80 in the late afternoon.

There was more than $33 million in reported volume.

MicroStrategy’s stock traded to a high of $960 and a low of $902.06 before closing the day at $927.78, a decrease of 1.49%.

Stock has been under pressure since MicroStrategy announced its latest offering of convertible notes to purchase Bitcoin on Monday.

However, Bitcoin continues to gain traction with several hedge fund and money managers that were previously skeptical of the cryptocurrency beginning to change their tone – DoubleLine CEO Jeffrey Gundlach, previously known as a Gold bull, became the latest to voice support for the Bitcoin trade.

The cryptocurrency continues to trade above $52,000 and the first North American Bitcoin ETF, Canada’s Purpose ETF (TSX: BTCC.U), launched on Thursday.

Pioneer Natural active

Pioneer Natural Resources’ 0.25% convertible notes due 2025 were also major volume movers on Thursday although with little change in price.

The 0.25% notes were changing hands at 149.5 versus a stock price of $133.85 in the late afternoon.

There was more than $37 million in reported volume.

Pioneer’s stock traded to a low of $131.76 and a high of $136.49 before closing the day at $133.01, a decrease of 2.34%.

While down on Thursday, Pioneer’s stock has climbed over the previous two sessions as winter storms and frigid temperatures disrupted the supply line for natural gas, sending prices soaring.

The natural gas company delayed its fourth-quarter earnings report, which was initially slated to be released on Wednesday, to Feb. 23 as a result of the severe weather.

Mentioned in this article:

Expedia Group Inc. Nasdaq: EXPE

GEO Group Inc. NYSE: GEO

MicroStrategy Inc. Nasdaq: MSTR

Pioneer Natural Resources Co. NYSE: PXD

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