Canopy Growth convertibles in demand; PTC Therapeutics jumps; Teladoc in the money

By Abigail W. Adams

Portland, Me., June 18 – The convertibles secondary market opened the week quietly with equity markets down and much of the new paper that entered the space last week finding their home.

Canopy Growth Corp.’s 4.25% convertible notes due 2023 continued to perform well their second day in the secondary space on Monday, a market source said.

The notes were in high demand during book building despite the special considerations required for the sector.

PTC Therapeutics Inc.’s 3% convertible notes were active and jumped more than 14 points outright and 4 points dollar neutral after the company announced positive interim clinical results for one of its drug candidates.

Citrix Systems Inc.’s 0.5% convertible notes due 2019 continued to see high-volume trading on Monday.

The 0.5% notes have been in focus since they were removed from the Thomas Reuters convertibles indices last week.

Teladoc Inc.’s recently priced 1.375% convertible notes due 2025 continued to outperform on Monday with the notes already in the money less than two months after pricing.

Canopy in demand

Canopy’s newly priced 4.25% convertible notes due 2023 continued to perform well in the secondary market after debuting on Friday.

The notes remained active and were seen trading between 101 and 102 with stock flat to up slightly early in the session, a market source said.

The notes closed Monday at 101.75 bid, 102.75 offered as the stock spiked about 3% in the afternoon. Canopy stock closed on the Toronto Stock Exchange at C$40.65, an increase of 3.2%, and on the New York Stock Exchange at $30.83, an increase of 3.46%.

The notes were sought after during book building, a market source said.

“From everyone’s standpoint, the deal was well done,” the source said. “There was certainly a lot of demand.”

Canopy Growth priced an upsized C$500 million of the convertible notes at the rich end of talk for a coupon of 4.25% to 4.75% and an initial conversion premium of 20% to 25% prior to the market open on Friday.

The initial deal size had been C$400 million. The greenshoe was also upsized to C$100 million from C$60 million.

While the Rule 144A and Regulation S deal from the Smiths Falls, Ont.-based recreational and marijuana company was “pretty straight-forward” outside of the Canadian currency, “there were some things to consider” due to the sector, the source said.

Canada is in the final stages of legalizing recreational marijuana and has a country-wide medical marijuana program.

However, laws governing medical and recreational marijuana in the United States vary from state to state. Marijuana is considered a Schedule 1 drug under federal law.

In terms of investing, funds are establishing their own policies related to the sector, a source said.

Canopy’s 4.25% convertible notes are being monitored for possible addition to the Thomas Reuters Convertible Indices, according to a market source.

PTC expands

PTC Therapeutics’ 3% convertible notes were active and up on an outright and dollar-neutral basis on Monday as the company’s stock skyrocketed in the wake of positive interim clinical trial results.

The 3% notes traded as high as 116½ on Monday with stock up more than 25%, a market source said.

The notes closed Friday at 101.

The notes were up about 4 points dollar neutral, a source said.

“They improved outright and on hedge,” the source said. “You just walk in and the stock is there. The notes are at a totally new level.”

PTC stock closed Monday at $47.88, an increase of 27.51%.

The spike in stock came after the pharmaceutical company announced positive interim results from a clinical study on risdiplam, an oral drug to treat spinal muscular atrophy in babies.

Citrix active

Citrix Systems’ 0.5% convertible notes due 2019 remained a major volume mover in the secondary space on Monday with the notes continuing to trade around parity. The notes were seen trading north of 149 with stock up almost $1.

Citrix stock closed Monday at 107.48, an increase of 0.5%.

The notes have seen high-volume trading since last week when they were dropped from the Thomas Reuters Convertible Indices.

Teladoc in the money

While trading activity was light, Teladoc’s recently priced 1.375% convertible notes due 2025 continued to outperform on Monday.

The notes were up about 3 points outright to trade north of 129 with stock up almost $1.50 early in the session.

Teladoc stock closed Monday at $61.82, an increase of 1.58%.

Teladoc priced $250 million of the seven-year convertible notes in early May with the greenshoe later fully exercised, lifting the size of the deal to $287.5 million.

Teladoc stock was $41.70 when the convertible notes priced. Less than two months after pricing, stock surpassed the 1.375% notes’ conversion price of $53.58.

Teladoc’s 3% convertible notes due 2022 were also active on Monday with the notes up about 1 point outright to trade at 154.46, according to Trace data. The conversion price on the 3% notes is $44.

The Purchase, N.Y.-based provider of virtual health care delivery services’ stock has been on the rise since the company reported a first-quarter earnings beat just prior to pricing its convertible notes offering in early May.

Mentioned in this article:

Canopy Growth Corp. TSE: WEED, NYSE: CGC

Citrix Systems Inc. Nasdaq: CTXS

PTC Therapeutics Inc. Nasdaq: PTCT

Teladoc Inc. NYSE: TDOC

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