Morning Commentary: Wayfair on tap; Akamai, Workiva, Southern Co. hit the secondary

By Abigail W. Adams

Portland, Me., Aug. 14 – The convertibles secondary market saw $2.8 billion in new paper flood the space on Wednesday with another $750 million set to price after the market close.

Akamai Technologies Inc. priced $1 billion in eight-year convertible notes, Workiva Inc. sold $300 million of seven-year convertible notes and Southern Co. priced $1.5 billion, or 30 million, three-year par of $50 series A equity units after the market close on Tuesday.

The new paper hit the secondary space on another ugly day for equities with the Dow Jones industrial average down more than 450 points, the Nasdaq composite off 2% and the S&P 500 down 1.66% early in Wednesday’s session.

While Akamai’s and Workiva’s new convertible notes were down on an outright basis, they were expanded dollar-neutral.

Southern Co.’s new equity units were also performing well.

Meanwhile, Wayfair Inc. is on deck with its $750 million offering of seven-year convertible notes, which is slated to price after the market close.

Price talk is for a coupon of 0.5% to 1% and an initial conversion premium of 32.5% to 37.5%.

Akamai dominates

Akamai Technologies priced $1 billion in eight-year convertible notes after the market close on Tuesday at par with a coupon of 0.375% and an initial conversion premium of 30%.

Price talk came at the cheap end of tightened talk for a coupon of 0% to 0.375% and an initial conversion premium of 30%, according to a market source.

Initial price talk was for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%.

The new paper dominated activity in the secondary space with the notes dropping well below par on an outright basis but expanding dollar-neutral.

The 0.375% notes traded as low as 98.25 with stock off more than 4%, a market source said.

However, the notes were expanded 0.5 point to 0.75 point dollar-neutral.

Akamai stock traded down to $84.54, a decrease of 5.4%, shortly before 11 a.m. ET.

Workiva

Workiva priced $300 million of seven-year convertible notes after the market close on Tuesday with a coupon of 1.125% and an initial conversion premium of 42.5%.

Price talk had been for a coupon of 0.875% to 1.375% and an initial conversion premium of 37.5% to 42.5%, according to a market source.

The 1.125% convertible notes were doing well early in the session but also dropped below par as stock tanked.

However, the notes were performing well dollar-neutral and were expanded 1 point to 1.5 points, a market source said.

Workiva stock traded down to $52.38, a decrease of 8.17%, early in the session.

Southern Co.

Southern Co. priced $1.5 billion, or 30 million, three-year par of $50 series A equity units after the market close on Tuesday with a dividend of 6.75% with a threshold appreciation premium of 20%.

Price talk had been for a dividend of 6.625% to 7.125% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

The equity units were performing well with the utility holding company’s stock unscathed by the sell-off in equities.

The equity units were changing hands between $50.25 and $50.50 early in the session.

Southern Co. stock traded up to $57.64, an increase of 0.77%, shortly before 11 a.m. ET.

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