Turning Point convertibles upsized, expand; Twitter better; Carbonite tanks outright

By Abigail W. Adams

Portland, Me., July 26 – New paper was again the focus of the convertibles secondary space on Friday with one new deal hitting the market.

Turning Point Brands, Inc. priced an upsized $150 million of five-year convertible notes after the market close on Thursday.

The new paper performed well in the secondary space, expanding on debut.

Outside of the new paper, Twitter Inc.’s 0.25% convertible notes due 2024 were active and improved on both an outright and dollar-neutral basis as stock soared after an earnings beat.

Carbonite Inc.’s 2.5% convertible notes due 2022 were the ‘disaster du jour’ on Friday with the notes tanking outright yet relatively unchanged dollar-neutral as stock cratered after its second-quarter earnings report.

Turning Point expands

Turning Point priced an upsized $150 million of five-year convertible notes after the market close on Thursday at par with a coupon of 2.5% and an initial conversion premium of 30%.

Pricing came at the cheap end of talk for a coupon of 2% to 2.5% and at the midpoint of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.

The greenshoe was also upsized to $22.5 million.

The initial size of the deal was $125 million with a greenshoe of $18.75 million.

The new paper was performing well in the secondary space.

The notes traded as high as 102.5 shortly after the opening bell but were largely wrapped around 102 with stock unchanged, a market source said.

Another source pegged the notes expanded 2 points dollar-neutral in the mid-afternoon.

While the majority of trading activity was outright accounts, there were some swap trades on the tape, a source said.

Turning Point Brands stock traded as high as $42.33 during Friday’s session but closed the day at $41.86, an increase of 1.04%.

Twitter improves

Twitter’s 0.25% convertible notes due 2024 were active with the notes making large gains on an outright basis and slightly expanded dollar-neutral as stock soared after an earnings beat.

The 0.25% notes were up 4.5 points outright to 105.75 early in the session. They continued to climb with the notes trading just south of 106 in the afternoon.

The notes were expanded between 0.25 point and 0.5 point dollar-neutral, sources said.

While less active, Twitter’s soon-to-mature 0.25% convertible notes due Sept. 15, 2019 and 1% convertible notes due 2021 were also trading up on an outright basis.

The 0.25% convertible notes were changing hands just shy of 99.625 with the yield to maturity about 3.3%, according to Trace data.

The 1% convertible notes due 2021 changed hands just north of 97.625 in the late afternoon.

The 0.25% convertible notes due 2019 and 1% convertible notes due 2021 are busted, a source said.

The conversion price for the two tranches is $77.64.

Twitter stock traded as high as $42.33 before closing the day at $41.52, an increase of 8.92%.

Twitter reported earnings of 20 cents per share on revenue of $841 million versus the 19 cents expected on revenue of $829.1 million, CNBC reported.

The social networking platform also reported a 14% year-over-year increase in active users.

Carbonite tanks

Carbonite’s 2.5% convertible notes due 2022 were the ‘disaster du jour’ of Friday’s session with the notes tanking on an outright basis as stock cratered following the tech company’s second-quarter earnings.

The 2.5% notes are an illiquid issue that rarely trades, a source said.

However, the notes were active on Friday given the large stock move.

The notes dropped about 18 points outright. They were changing hands around par to 100.5 early in the session and rose to 101 in the late afternoon.

However, the notes were moving largely in line dollar-neutral.

Carbonite stock tanked on Friday, trading as low as $16.30 before closing the day at $18.01, a decrease of 24.64%.

While Carbonite beat on the bottom line in its second-quarter earnings report, it missed analyst expectations on the top line.

The tech company reported earnings per share of 56 cents versus analyst expectations for earnings per share of 47 cents.

However, Carbonite reported revenue of $121.5 million for the second-quarter, which missed expectations for revenue of $135 million.

In addition, Carbonite CEO Mohamad Ali announced he was leaving the company to join International Data Group Inc.

Several analysts also downgraded the company, according to a market source.

Analysts at Barclays downgraded the company from “overweight” to “underweight” and revised their price target for the stock to $20 from $43.

Mentioned in this article:

Carbonite Inc. Nasdaq: CARB

Turning Point Brands, Inc. NYSE: TPB

Twitter Inc. NYSE: TWTR

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