NextGen offering plays to heavy demand; Wolfspeed falls post-earnings; Twitter active on takeover eve

By Abigail W. Adams

Portland, Me., Oct. 27 – The convertible primary market returned to action on Thursday with the first deal in nearly two weeks set to price after the market close.

NextGen Healthcare Inc. is on deck with a $200 million offering of five-year convertible notes.

The deal played to heavy demand during bookbuilding with the pricing of the deal attractive.

The chunky coupon was a welcome shift from the low- and no-coupon deals that previously populated the market.

“This looks good,” a source said. “Pricing is going the right way for investors.”

Meanwhile, topical and earnings-related news were the main drivers of trading activity in the secondary space on another choppy day for equity markets.

Indexes again wavered between positive and negative territory before ending the day mixed with value and small cap stocks outperforming.

Disappointing earnings from the tech sector continued to weigh down broader markets.

The Dow Jones industrial average closed Thursday up 194 points or 0.61%, the S&P 500 index closed down 0.61%, the Nasdaq Composite index closed down 1.63% and the Russell 2000 index closed up 0.11%.

There was $96 million in reported volume about one hour into the session and $433 million in reported volume heading into the market close.

Wolfspeed Inc.’s 0.25% convertible notes due 2028 tanked outright as stock fell double digits post-earnings.

Twitter Inc.’s convertible notes remained active with the closing of Elon Musk’s takeover of the company expected on Friday.

NextGen a ‘blowout’

NextGen plans to price $200 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 3.75% to 4.25% and an initial conversion premium of 30% to 35%.

The deal was heard to be a blowout.

Underwriters were marketing the deal with assumptions of a 500 basis points credit spread and a 32% vol.

Using those assumptions, the deal modeled about 3 points cheap at the midpoint of talk, a source said.

The company is a moneymaker and the borrow on stock was good.

Market players were also taking a look at the chunky coupon with the pricing of recent deals becoming increasingly attractive.

The deal was heard to be pricing at or towards the rich end of talk and is expected to do well on its secondary market debut.

Wolfspeed’s earnings

Wolfspeed’s 0.25% convertible notes due 2028 were in focus on Thursday with the notes tanking outright as stock fell double digits post-earnings.

However, the notes were relatively unchanged on a dollar-neutral basis, a source said.

The 0.25% convertible notes sank 12 points outright with stock down 20% in intraday activity.

They were changing hands at 96.625 versus a stock price of $88.70 early in the session, according to a market source.

They traded at 96.75 in the late afternoon.

The notes were played on different deltas but the average was in the low 70s, a source said.

Using that delta, the notes were moving inline dollar-neutral.

However, those on a heavier hedge made out on the stock move, a source said.

There was $25 million in reported volume.

Wolfspeed stock traded to a low of $77.20 and a high of $90.54 before closing the day at $87.06, a decrease of 18.21%.

While Wolfspeed beat on the top and bottom lines, stock tanked after the company released weak guidance.

Twitter trades

Twitter’s convertible notes dominated the tape on Thursday as the market awaits the closing of Elon Musk’s takeover on Friday.

Twitter’s 0% convertible notes due 2026 were trading with increasing confidence the takeover would occur.

The notes rose to a 99-handle on Thursday.

They were changing hands at 99.125 in the late afternoon.

The notes were the most actively traded in the secondary space with $30 million in reported volume heading into the market close.

Twitter’s 0.25% convertible notes due 2024 continued to trade on a 111-handle.

Twitter stock traded to a high of $54 before closing the day at the session low of $53.70, an increase of 0.66%.

Musk will pay $54.20 a share in his $44 billion takeover of the company with closing expected on Friday.

While Musk has stated his intentions to follow through with the acquisition, the market has been wary.

The 0% convertible notes will be taken out at par and the 0.25% notes will be taken out according to the make-whole matrix.

Mentioned in this article:

NextGen Healthcare Inc. Nasdaq: NXGN

Twitter Inc. NYSE: TWTR

Wolfspeed Inc. NYSE: WOLF

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