MicroStrategy returns with new convertible offering; Coinbase heavily oversubscribed

By Abigail W. Adams

Portland, Me., March 13 – The convertibles primary market was capitalizing on the crypto craze with two heavyweights from the field set to price offerings.

One week after pricing a highly successful offering, MicroStrategy Inc. is returning to the market with a $500 million offering of seven-year convertible notes, which is slated to price post-close on Thursday.

Price talk is for a coupon of 0.375% to 0.875% and an initial conversion premium of 40% to 45%.

Citigroup Global Markets Inc. is sole bookrunner for the Rule 144A offering.

Coinbase Global Inc. plans to price $1 billion of six-year convertible notes after the market close on Wednesday.

The deal looked cheap based on underwriters’ assumptions and was heavily oversubscribed with Coinbase poised to follow in the footsteps of the phenomenal success of MicroStrategy’s recently priced 0.625% convertible notes due 2030.

While MicroStrategy and Coinbase are the only deals on the calendar, convertible issuers continued to address their looming maturities through buybacks and exchanges.

Plug Power Inc. announced on Wednesday it was issuing new 7% convertible notes due 2026 as part of privately negotiated exchange agreements for the company’s 3.75% convertible notes due 2025.

Meanwhile, the secondary space was active as market players awaited the new deal in the works.

Equity indexes were either side of unchanged on Wednesday as markets continue to assess the latest CPI print and its implications for rate cut expectations.

The Dow Jones industrial average closed up 38 points, or 0.10%, the S&P 500 index closed down 0.19%, the Nasdaq Composite index closed down 0.54% and the Russell 2000 index closed up 0.30%.

There was $227 million in reported convertibles trading volume about one hour into the session and $756 million on the tape in the late afternoon.

Coinbase’s outstanding 0.5% convertible notes due 2026 saw heavy volume with the notes slightly weaker on the heels of the new offering.

MicroStrategy’s convertible notes continued their meteoric rise as Bitcoin again set a new all-time high.

However, Global Payments Inc.’s 1.5% convertible notes due 2031 (Baa3/BBB-) was once again the top trader in the space with the notes again improved on abnormally heavy volume.

Coinbase eyed

Coinbase plans to price $1 billion of six-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 400 basis points over SOFR and a 50% vol.

Using those assumptions, sources pegged the deal 1 to 3.5 points cheap at the midpoint of talk.

The crypto craze was changing the vol. standards of the market with both Coinbase and MicroStrategy marketing their offerings with a 50% vol.

Vol. is traditionally capped out at 45%, a source said.

However, the high vol. assumption is well-deserved with some pegging the vol. for Coinbase even higher at 55%, sources said.

The 400 bps credit spread seemed somewhat conservative with Coinbase’s junk bonds trading tighter, a source said.

The deal was in hot demand as Bitcoin set a new all-time high on Wednesday with the Coinbase offering heard to be more than 5x oversubscribed.

While the capital raise was coming as a refinancing, the timing was opportunistic with the company tapping the market from a position of strength.

Proceeds are earmarked to repay at maturity or repurchase or redeem prior to maturity the company’s 0.5% convertible notes due 2026, 3.375% senior notes due 2028 and 3.625% senior notes due 2031.

Coinbase’s 0.5% convertible notes due 2026 were slightly softer in active trade on Wednesday.

However, with allocations on the new deal expected to be tight, the 0.5% convertible notes were holding up comparatively well.

The notes were down about 1 point outright. They were trading at 106.375 versus a stock price of $258.52 in the late afternoon, according to a market source.

There was $51 million in reported volume.

Coinbase’s stock traded to a high of $269.39 and a low of $250.53 before closing at $251.73, down 1.72%.

While the 0.5% convertible notes due 2026 carry a higher conversion premium than the notes on deck, holders may be holding onto the outstanding notes to maintain their exposure to the name with allocations expected to be tight.

Plug’s exchange

Plug Power became the latest convertible issuer to opt for a privately negotiated exchange to address their looming maturity.

The company exchanged $138,816,000 in principal of its 3.75% convertible notes due 2025 for $140,396,000 in principal of new 7% convertible notes due 2026 in privately negotiated transactions, according to a company news release.

Plug’s new 7% convertible notes were not active during Wednesday’s session.

However, the exchange boosted the company’s 3.75% convertible notes due 2025.

The 3.75% notes added about 6 points outright with the notes trading at 98.125 in the late afternoon with the yield about 5.375%, a source said.

There was $13 million in reported volume.

Plug’s stock closed Wednesday at $3.36, a decrease of 5.08%.

The exchange offer left about $58.5 million in principal of the 3.75% notes outstanding.

MicroStrategy shoots higher

The meteoric rise of MicroStrategy’s convertible notes continued on Wednesday with stock up another 9% as Bitcoin set a fresh high.

MicroStrategy’s recently priced 0.625% convertible notes due 2030 jumped another 13 points outright.

They were trading at 141.625 versus a stock price of $1,758 in the late afternoon.

The notes expanded another 0.75 point dollar-neutral, a source said.

There was $12 million in reported volume.

The 0% convertible notes due 2029 were up another 9 points outright.

They were trading at 143 versus a stock price of $1,760 in the late afternoon.

There was $13 million in reported volume.

MicroStrategy’s stock traded to a low of $1,620 and a high of $1,774 before closing at $1,766.15, an increase of 10.85%.

Bitcoin hit a new all-time high of $73,634 on Wednesday.

Global Payments active

Global Payments’ 1.5% convertible notes due 2031 continued to dominate activity in the secondary space with the notes again adding on an outright and dollar-neutral basis.

The 1.5% notes were up another 1.5 points outright with stock up about 1%.

They were trading at 106.125 versus a stock price of $134.32 in the late afternoon.

The notes gained another 0.75 point dollar-neutral, a source said.

Trading volume remained abnormally high with $209 million on the tape in the late afternoon.

Global Payments’ stock traded to a low of $133.11 and a high of $140.38 before closing at $134, an increase of 0.67%.

Mentioned in this article:

Coinbase Global, Inc. Nasdaq: COIN

Global Payments Inc. NYSE: GPN

MicroStrategy Inc. Nasdaq: MSTR

Plug Power Inc. Nasdaq: PLUG

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