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Morning Commentary: RingCentral’s $1 billion convertibles price, trade down on debut
By Abigail W. Adams
Portland, Me., Feb. 28 – The convertible primary market continued to bring forward new deals as losses intensified on Friday in the broader equity markets.
RingCentral Inc. priced $1 billion of five-year convertible notes after the market close on Thursday at par with a coupon of 0% and an initial conversion premium of 50%.
Pricing came in line with price talk for a fixed coupon of 0% and at the cheap end of talk for an initial conversion premium of 50% to 55%, according to a market source.
The new 0% convertible notes traded down on debut.
They were seen as low as 97.25 with stock off more than 3% about one hour into Friday’s session, a market source said.
RingCentral’s 0% convertible notes due 2023 were also active early Friday and were changing hands at 276.
The activity in the 0% convertible notes due 2023 was most likely due to the company’s buyback, a source said.
RingCentral will use $509.6 million of the proceeds from its offering to repurchase $172.5 million of the principal amount of its 0% convertible notes due 2023 through privately negotiated transactions.
While RingCentral stock posted gains on Thursday, it was trading off with the overall market early in Friday’s session.
RingCentral stock traded as low as $222.52 early Friday but pared its losses and was changing hands at $231.15, a decrease of 2.08%, shortly before 11 a.m. ET.
With the conversion price of the new 0% notes significantly higher than the 0% convertible notes due 2023, there was most likely a net buyer of stock, which kept the stock price up on Thursday even as the overall market plummeted, a source said.
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