Intercept on tap; Workday eyed; Fortive expands; j2 Global contracts; Microchip active

By Abigail W. Adams

Portland, Me., May 8 – Despite choppy market conditions, a new convertible note offering surfaced on Wednesday.

Intercept Pharmaceuticals Inc. plans to price $200 million of seven-year convertible notes after the market close on Thursday with price talk for a coupon of 1.5% to 2% and an initial conversion premium of 30% to 35%, according to a market source.

Goldman Sachs & Co. LLC and Credit Suisse Securities (USA) LLC are active bookrunners for the registered offering, which carries a greenshoe of $30 million.

The notes are pricing concurrently with a $200 million offering of common stock, which also carries a greenshoe of $30 million.

Meanwhile, there was an uptick in activity in the convertible secondary space on Wednesday as equity markets showed signs of stabilization following brutal declines on Monday and Tuesday.

There was $81 million in reported volume about one hour into Wednesday’s session and $378 million in the late afternoon, sources said.

Workday Inc.’s 0.25% convertible notes due 2022 were in focus with the notes making gains on an outright basis as the issue was dropped from the Thomson Reuters Convertible Indices.

Fortive Corp.’s 0.875% convertible notes due 2022 were contracting in high-volume activity with stock off slightly following an analyst downgrade.

j2 Global Inc.’s 3.25% convertible notes due 2029 were expanding in active trading following an earnings beat.

Microchip Technology Inc.’s convertible notes were also active with the notes moving lower alongside stock after a mixed earnings report.

Workday in focus

Workday’s 0.25% convertible notes due 2022 were the most actively traded issue in the secondary space on Wednesday as the issue was dropped from the Thomson Reuters Convertible Indices, sources said.

The 0.25% convertible notes were up about 1.25 points outright. They were changing hands around 145.25 versus an equity price of $199.06, according to a market source.

The notes saw more than $28 million in reported volume by the late afternoon.

Workday stock closed Wednesday at $196.92, a decrease of 0.82%.

The 0.25% notes were dropped from the Thomson Reuters Convertibles Indices on Wednesday.

The trading activity was driven by a rebalancing of the indices, a source said.

Fortive contracts

Fortive’s 0.875% convertible notes due 2022 were contracting in high-volume activity on Wednesday following an analyst downgrade.

The 0.875% convertible notes were changing hands around 103.75, according to a market source.

They were contracted 0.625 point dollar-neutral, sources said.

The contraction was a large one for the Fortive notes, a market source said, which have traded rich since hitting the market in late February.

The investment-grade rating for the notes has largely driven their demand and trading level.

The notes were among the most actively traded during Wednesday’s session with more than $11 million in reported volume about one hour into Wednesday’s session and $17.5 million on the tape by the late afternoon.

Fortive stock closed Wednesday at $82.48, a decrease of 1.2%.

The industrial conglomerate’s stock was downgraded to “equal weight” from “overweight” by Morgan Stanley on Wednesday.

j2 expands

j2 Global’s 3.25% convertible notes due 2029 also saw high-volume activity on Wednesday with the notes expanding following an earnings beat.

The 3.25% convertible notes rose about 2 points outright to 136.625 early in the session, according to a market source.

They were trading at 138 bid, 138.5 offered versus a stock price of $88.39 later in the afternoon.

The notes were expanded about 0.5 point dollar-neutral, a market source said.

More than $15 million of the bonds were on the tape by the late afternoon.

j2 Global stock closed Wednesday at $88.80, an increase of 3.84%.

The cloud services company reported earnings per share of $1.40 versus analyst expectations for earnings per share of $1.32.

Revenue was $304.5 million versus analyst expectations for revenue of $296 million.

Microchip’s earnings

Microchip Technology’s convertible notes were active with the notes moving lower alongside stock after a mixed earnings report.

The 1.625% convertible notes due 2027 were down about 3 points outright.

They were changing hands at 120.5 versus a stock price of $92.18 in the mid-afternoon, according to a market source.

More than $9 million of the bonds were on the tape.

Microchip’s 1.625% convertible notes due 2025 dropped about 6.5 points outright to 180 early in the session.

They were changing hands at 182.625 versus a stock price of $91.83 in the late afternoon.

About $8 million of the bonds were on the tape during Wednesday’s session.

While among the most actively traded names in the secondary space, some sources were surprised Microchip Technology did not see more trading activity.

While down to as low as $88.52 pre-market, Microchip stock pared its losses as the session progressed.

Stock traded to a low of $89.75 and a high of $94.06 before closing the day at $91.54, a decrease of 2.77%.

The chipmaker beat on the bottom line with earnings per share of $1.48 versus analyst expectations for earnings per share of $1.39.

However, it missed slightly on its top line with reported revenue of $1.329 billion versus analyst expectations for revenue of $1.337 billion.

Stock was trading down on weak guidance. Microchip projected earnings per share of $1.38 for the current quarter; analysts were expecting earnings per share of $1.56.

The low guidance was due to continued tensions between China and the United States, Investor’s Business Daily reported.

Mentioned in this article:

Fortive Corp. NYSE: FTV

Intercept Pharmaceuticals Inc. Nasdaq: ICPT

j2 Global Inc. Nasdaq: JCOM

Microchip Technology Inc. Nasdaq: MCHP

Workday Inc. Nasdaq: WDAY

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