Alarm.com convertibles expand on debut; DocuSign gains continue; Nio notes come in

By Abigail W. Adams

Portland, Me., Jan. 15 – The last new convertible bond deal of the week hit the secondary space on Friday.

In a heavily oversubscribed offering, Alarm.com priced an upsized $435 million of five-year convertible notes after the market close on Thursday.

While the notes were strong on an outright basis early in Friday’s session, they came in as the session progressed. However, the notes saw a large dollar-neutral expansion.

Alarm.com’s offering brings the weekly tally for new paper to $3.05 billion.

Five issuers priced six tranches over the course of the week and five of those six tranches came as “no-no’s,” the nickname for convertible bonds with 0% yields.

The flurry of new deal activity is expected to continue as opportunistic issuers rush to take advantage of current market conditions.

However, with equities seeing a minor sell-off on Friday as investors digested the ramifications of the stimulus plan laid out by president-elect Joseph Biden, some sources questioned how long the market conditions would last.

“Investors are worried inflation is going to kick and the bond market is going to start rallying,” a source said. “That means a downdraft for equities.”

Despite the down day for equities, several of the deals to price over the past week continued to perform well.

DocuSign Inc.’s 0% convertible notes due 2026 continued to rise on an outright and dollar-neutral basis.

However, Nio Inc.’s two tranches of convertible notes continued to trade down on an outright basis as stock sold off on Friday.

Alarm.com active

In a heavily oversubscribed offering, Alarm.com priced an upsized $435 million of five-year convertible notes at par with a coupon of 0% and an initial conversion premium of 47.5%.

Pricing came in line with tightened talk for a fixed coupon of 0% and at the rich end of revised talk for an initial conversion premium of 42.5% to 47.5%, according to a market source.

Initial talk was for a coupon of 0% to 0.5% and an initial conversion premium of 37.5% to 42.5%.

The deal upsized twice. The initial upsize was to $400 million from the initial $350 million.

The offering from the security technology company was heard to be as much as eight times oversubscribed.

The new paper was strong on an outright basis out of the gate. However, it came in as the session progressed.

The 0% convertible notes traded as high as 104 early in the session.

However, they were wrapped around par in the late afternoon.

While flat on an outright basis, the notes expanded upwards of 2 points dollar-neutral, a source said.

Alarm.com’s stock traded to a high of $100.35 and a low of $96.40 before closing the day at $97.61.

DocuSign improves

DocuSign’s 0% convertible notes due 2026 continued to gain on an outright and dollar-neutral basis on Friday.

The notes were up about 1 point outright with stock off slightly heading into the market close.

The 0% notes traded up to 107 in the late afternoon.

DocuSign’s stock traded to a high of $256.44 and a low of $246.89 before closing the day at $249.28, a decrease of 0.39%.

Nio trades lower

Nio’s convertible notes continued to trade down on an outright basis as stock sold off on Friday.

However, the 0% notes due 2026 continued to outperform the 0.5% notes due 2027, which sources attributed to their shorter duration.

The 0% notes were seen changing hands around 102 with stock at $57 in the late afternoon.

The 0.5% notes due 2027 traded down to par in the late afternoon.

Both tranches were on a 105-handle on their aftermarket debut on Wednesday.

Nio’s American Depositary Shares traded to a high of $60.22 and a low of $55.67 before closing the day at $56.27, a decrease of 7.57%.

While down on Friday, Nio’s ADSs have been on “an incredible run,” a source said, breaking out to an all-time high prior to the convertible notes pricing.

There was speculation the Shanghai-based electric car manufacturer was on the verge of bankruptcy about two years ago.

The company is now one of the three most valuable car companies by market cap in the world, a source said.

Mentioned in this article:

Alarm.com Nasdaq: ALRM

DocuSign Inc. Nasdaq: DOCU

Nio Inc. NYSE: NIO

© 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.