Coinbase convertibles eyed; Sunnova below par; UGI gains; MicroStrategy notes active

By Abigail W. Adams

Portland, Me., May 18 – New convertibles paper was in focus on Tuesday with one highly anticipated offering set to price after the market close and two deals making their aftermarket debut.

One month after going public, Coinbase Global Inc. plans to price $1.25 billion of five-year convertible notes after the market close on Tuesday.

The deal looked cheap based on underwriters’ assumptions. However, the credit spread and terms were aggressive, sources said.

Coinbase is the latest offering giving convertible investors an inroad into the highly speculative and controversial world of cryptocurrencies.

As market players eyed Coinbase’s new offering, new paper from Sunnova Energy International Inc. and UGI Corp. made their aftermarket debut.

While Sunnova’s paper struggled below par, UGI’s equity units were performing well on debut.

Meanwhile, trading activity was light outside of the new paper.

There was $94 million in reported volume about one hour into the session and $441 million on the tape about one hour before the market close.

MicroStrategy Inc.’s 0% convertible notes due 2027, the other Bitcoin play in the convertibles market, were active although the notes were little changed on an outright basis.

Coinbase in focus

Coinbase plans to price $1.25 billion of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 55% to 60%, according to a market source.

The deal was heard to be in the market with assumptions of 200 basis points over Libor and a 45% vol.

Using those assumptions, the deal looked about 2 points cheap at the midpoint of talk.

However, the credit spread seemed aggressive for such a young company, a source said. The terms were also extremely aggressive.

“I thought we were done with the exorbitant premia,” a source said.

While Coinbase has only been publicly traded since April 14, there is stock available for borrow at a rate of negative 0.22, a source said.

While sources questioned the credit spread for the young company, the volatility was accurate, sources said.

The crypto-exchange platform’s stock was volatile during Tuesday’s session and traded to a high of $252.16 and a low of $238.50 before closing the day at $239, a decrease of 3.72%.

Bitcoin also continued to struggle with the cryptocurrency trading down to $43,457 at the close of equity markets.

Sunnova below par

Sunnova Energy priced $500 million of long five-year convertible notes after the market close on Monday at the cheap end of talk with a coupon of 0.25% and an initial conversion premium of 30%.

Price talk was for a coupon of 0% to 0.25% and an initial conversion premium of 30% to 35%, according to a market source.

The new paper was struggling on an outright basis.

It traded as low as 97.375 early in the session. While there were a few prints at 100.25 they appeared to be from the underwriter supporting the deal, a source said.

The notes were changing hands at 98.75 shortly before 11 a.m. ET.

However, the notes improved alongside stock as the session progressed.

They were changing hands just shy of par versus a stock price of $27.12 in the late afternoon, according to a market source.

Sunnova’s stock traded to a high of $27.39 and a low of $25.77 before closing the day at $26.53, a decrease of 0.26%.

UGI in focus

UGI priced $200 million par-of-$100 equity units after the market close on Monday at the midpoint of talk with a yield of 7.125% and a threshold appreciation premium of 20%, according to an FWP filing with the Securities and Exchange Commission.

Price talk was for a yield of 6.875% to 7.375% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

The equity units were performing well on debut.

They were marked at 101 bid, 101.5 offered versus a stock price of $43.81 in the early afternoon.

UGI’s stock traded to a high of $44.03 and a low of $43.48 before closing the day at $43.76, a decrease of 0.11%.

MicroStrategy active

MicroStrategy’s 0% convertible notes due 2027 were active on Tuesday although the notes were little changed on an outright basis.

The 0% convertible notes were changing hands at 74.25 versus a stock price of $501.35 in the mid-afternoon, according to a market source.

There was about $12 million in reported volume.

Holders may have been selling to make room for Coinbase’s new paper.

MicroStrategy’s stock traded to a high of $504.26 and a low of $470.57 before closing the day at $487.20, a decrease of 0.44%.

MicroStrategy’s convertible notes offered a way to play Bitcoin without becoming directly involved in the cryptocurrency.

Proceeds from both MicroStrategy’s $1.05 billion issue of the 0% convertible notes due 2027 and $650 million issue of 0.75% convertible notes due 2025 were used to purchase Bitcoin.

However, the 0% convertible notes have been under pressure as Bitcoin’s meteoric rise earlier in the year waned.

Bitcoin remained under pressure on Tuesday with the digital currency trading to its lowest level since February after China announced it could not be used as a form of payment.

Mentioned in this article:

Coinbase Global Inc. Nasdaq: COIN

MicroStrategy Inc. Nasdaq: MSTR

Sunnova Energy International Inc. NYSE: NOVA

UGI Corp. NYSE: UGI

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