Five9, Teladoc on tap; JPMorgan/Voya notes, IAC convertibles active; Ironwood eyed

By Abigail W. Adams

Portland, Me., May 2 – While earnings season has spurred trading activity in the secondary space, it is still relatively low with the market looking to new issuances to increase trading volume, a market source said. And after a period of silence from the primary market, two new deals are coming.

Five9 Inc. plans to price $200 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0% to 0.125% and an initial conversion premium of 30% to 35%, according to a market source.

J.P. Morgan Securities LLC and Goldman Sachs & Co. are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $30 million.

Teladoc Inc. plans to price $225 million of seven-year convertible notes after the market close on Thursday with price talk for a coupon of 0.875% to 1.375% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Jefferies & Co., JPMorgan and Piper Jaffray & Co. are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $33.75 million.

Meanwhile, in the secondary space, JPMorgan Chase Financial Co. LLC’s most recent 0.25% cash-settled equity-linked notes tied to the common stock of Voya Financial, Inc. were the volume leaders on Wednesday with $27.5 million of bonds in play by late afternoon.

While the notes saw heavy trading volume by dollar amount, they changed hands in large tracts with only eight trades on the tape.

IAC FinanceCo Inc.’s 0.875% convertible notes due 2022 also saw high-volume trading action on Wednesday with the notes expanding dollar neutral as the stock continued to decline. IAC stock plunged on Tuesday after Facebook announced it would unveil a dating feature on its network, creating a competitor to IAC’s own services.

Insmed Inc.’s struggling 1.75% convertible notes due 2025 jumped alongside its stock on Wednesday after reporting first-quarter earnings and a positive update on its pipeline for new medications prior to the market open. The notes broke par on Wednesday for the first time since January, when the notes priced.

Zendesk Inc.’s 0.25% convertible notes due 2023 were up both outright and dollar neutral on Wednesday after reporting first-quarter earnings after the market close on Tuesday, although there was “not a ton of trading activity,” a market source said.

While the notes have seen little trading activity, there is “a lot of concern” surrounding Ironwood Pharmaceuticals Inc.’s 2.25% convertible notes due 2022 after the company announced it would split into two distinct publicly traded companies on Tuesday, sources said.

The notes were contracted about 0.5 point on Wednesday.

JPMorgan/Voya notes active

JPMorgan’s most recent 0.25% cash-settled notes tied to Voya were active on Wednesday with the notes seeing large block trades.

The notes were seen trading to a low of 98 and a high of 100.344 before closing the day at 99.667, according to Trace data. Voya stock closed Wednesday’s session at $52.00, an increase of 0.95%.

JPMorgan set the threshold price for the new 0.25% notes due 2023 on Wednesday at $68.38972 and the conversion rate at 14.6221.

The company priced its most recent offering of $600 million of the cash-settled equity-linked notes on April 24.

JPMorgan’s first issuance of 0.25% cash-settled equity-linked notes tied to Voya Financial, which also mature on May 1, 2023, saw a flurry of high-volume trading activity late in the afternoon on Tuesday.

The old 0.25% notes traded just south of 99.75 late Tuesday.

The high-volume action surrounding the old 0.25% notes was most likely the result of month-end trading activity with funds looking to either raise money or put money to work, a market source said.

IAC’s dating woes

IAC’s 0.875% convertible notes due 2022 were also major volume movers on Wednesday with more than $17 million bonds changing hands over 20 trades by the late afternoon. The notes were seen trading at 110.5 versus an equity price of $130.10.

With IAC stock again off on Wednesday, the notes were seen up about 0.5 point to 0.75 point on a dollar-neutral basis, a market source said. They move on about a 60% delta.

The 0.875% notes plunged 11 points outright as the underlying stock dropped more than 13% late in the afternoon on Tuesday.

The sell-off of the New York-based media holding company’s stock was sparked by Facebook’s announcement it would soon unveil a new dating feature on its network.

IAC is the parent company to online dating websites Match.com, Plenty of Fish, Tinder and OkCupid.

Insmed trades up

Insmed’s struggling 1.75% notes due 2025 rebounded on Wednesday and traded, at times, above par for the first time since pricing in January.

While the 1.75% notes gained about 5 points outright with most trades north of 99, they were “nuking right alongside stock” and remained relatively unchanged dollar neutral, a market source said.

Insmed stock closed Wednesday at $27.42, an increase of 9.5%. Insmed reported first-quarter earnings and an update on its product pipeline prior to the market open on Wednesday.

The biotech company reported a loss of 89 cents per share versus analyst expectations for a loss of 98 cents per share.

Insmed also gave an update on its New Drug Application for ALIS, a treatment for a rare lung disease, which is under review by the Food and Drug Administration.

“It’s looking like it might get fast-track approval,” a market source said.

Zendesk expands

Zendesk’s 0.25% convertible notes gained on both an outright and dollar-neutral basis on Wednesday after reporting earnings after the market close Tuesday.

The notes were up about 0.25 point to 0.5 point dollar neutral, a market source said.

They were seen trading at 107.5 versus an equity price of $52.13. Prior to Wednesday, the notes were trading at 103.

Zendesk stock hit a 52-week high on Wednesday, closing the day at $52.12.

Zendesk reported non-GAAP earnings per share of 2 cents for the first quarter, which beat analyst expectations for a loss of 3 cents per share.

Ironwood a concern

There is a lot of concern surrounding Ironwood’s 2.25% convertible notes due 2022 after the company announced it would split into two publicly traded companies on Tuesday.

“There’s a lot of concern and risk around the bond right now,” a market source said.

It is unclear the impact the spinoff will have on the convertible notes, such as what the credit and volatility will look like, the source said.

The 2.25% notes have not been very active since the news broke on Tuesday, which some market sources found surprising. About $5 million bonds traded by late afternoon Wednesday.

They were contracted about 0.5 point dollar neutral, a market source said.

The convertibles were seen trading at 133.134 versus an equity price of $19.19. Ironwood stock closed Wednesday’s session at $18.91, an increase of 1.18%.

Ironwood announced alongside earnings on Tuesday that it would split into two public companies with research and development falling under the new company, which will launch in 2019.

“People are digging through the debentures to figure out what part of the company the convertible will fall under,” a market source.

Ironwood’s credit widened by 25 basis points on Tuesday after the announcement, the source said.

There is concern Ironwood will turn into another Savient Pharmaceuticals, which sold its assets to Crealta Pharmaceuticals in 2013. Savient’s 4.75% convertibles due 2018 became “a tough trade,” a market source said. “Folks are kind of worried this one will be part II.”

Mentioned in this article:

IAC FinanceCo Inc. Nasdaq: IAC

Ironwood Pharmaceuticals Inc. Nasdaq: IRWD

Insmed Inc. Nasdaq: INSM

Five9 Inc. Nasdaq: FIVN

Teladoc Inc. NYSE: TDOC

Voya Financial, Inc. NYSE: VOYA

Zendesk Inc. NYSE: ZEN

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