Coupa Software upsizes, tightens talk; Altair, Q2 Holdings expand on debut

By Abigail W. Adams

Portland, Me., June 6 – The convertibles primary market has been active with a flurry of new deals capitalizing on a rally in equities.

Coupa Software Inc. plans to price an offering of six-year convertible notes after the market close on Thursday.

The deal was in demand during bookbuilding and was heard to have been upsized with price talk tightened.

While market players eyed Coupa’s offering, new paper from Q2 Holdings Inc. and Altair Engineering Inc. were in focus in the secondary space with both deals trading up on debut.

While issuers stepped forward over the past two days as markets rebounded from their lows, accounts were beginning talk about a pull-back in tech.

Hedge funds were eyeing the space and accounts were adjusting deltas in preparation for a volatility spike in the sector, a source said.

Coupa upsizes, tightens talk

Coupa Software upsized its offering of six-year convertible notes to $700 million and tightened talk to a coupon of 0% to 0.125% and an initial conversion premium of 35%, according to a market source.

Initial price talk was for a coupon of 0.125% to 0.625% and an initial conversion premium of 30% to 35%.

The initial size of the deal was $500 million.

Underwriters were marketing the deal with a credit spread of 300 basis points over Libor and a 40% vol., according to a market source.

Sources pegged the deal 1.75 points to 2 points cheap at the midpoint of initial price talk.

However, the revised price talk placed the deal more at fair value, a source said.

The deal was highly sought after during bookbuilding with the company well-liked in the convertibles universe.

“It’s a great name with a great story,” a market source said.

The borrow on the stock is also good.

However, the revision to the price talk took some of “the juice out of them,” a market source said.

The San Mateo, Calif.-based cloud platform for business spend management is a repeat issuer of convertible notes and was part of the wave of technology companies to tap the market in 2018.

Coupa’s outstanding 0.375% convertible notes due 2023 have skyrocketed since pricing in January 2018.

The 0.375% notes were last seen trading at 264.58. The notes largely trade in line with stock, a source said. They were unchanged by Coupa’s new offering.

Q2 notes expand

Q2 Holdings priced an upsized $275 million of seven-year convertible notes after the market close on Wednesday at par with a coupon of 0.75% and an initial conversion premium of 27.5%.

Pricing came at the rich end of revised price talk of 0.75% to 0.875% and an initial conversion premium of 27.5%, according to a market source.

Initial price talk was for a coupon of 0.75% to 1.25% and an initial conversion premium of 25% to 30%.

The greenshoe was also upsized to $41.25 million.

The initial size of the deal was $200 million with a greenshoe of $30 million.

The notes priced concurrently with an upsized 2,637,986 shares of common stock, which priced at $69.50 per share.

The notes saw a large dollar-neutral expansion out of the gate.

The 0.75% notes traded up to 101.5 on an outright basis early in Thursday’s session. They continued to post gains and traded up to 102 in the mid-afternoon.

The notes were expanded 1.5 points dollar-neutral, a market source said.

There were lots of swap trades on the tape, another source said.

Q2’s 0.75% convertible notes due 2023 were active on Thursday as the new deal hit the market.

The 0.75% notes were changing hands around 132.25 with about $10 million of the bonds on the tape in the late afternoon.

However, the notes were trading sidewise and were unchanged by Q2’s new offering.

Q2 stock traded to a high of $70.98 and a low of $68.42 before closing the day at $70.34, a decrease of 0.1%.

Altair trades up

Altair Engineering priced an upsized $200 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 0.25% and an initial conversion premium of 30%.

Pricing came at the midpoint of talk for a coupon of 0.125% to 0.375% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The notes also traded out of the gate. The notes traded as high as 101.5 early in the session and were changing hands around 101 in the mid-afternoon.

The notes also expanded on a dollar-neutral basis. However, the trading activity was largely driven by outright accounts, a source said.

Altair stock traded as high as $35.76 during Thursday’s session before closing the day at $34.80, a decrease of 2.71%.

Mentioned in this article:

Altair Engineering Inc. Nasdaq: ALTR

Coupa Software Inc. Nasdaq: COUP

Q2 Holdings Inc. NYSE: QTWO

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.