Morning Commentary: Wayfair’s convertibles hit the market, trade ‘all over the place’

By Abigail W. Adams

Portland, Me., Aug. 15 – A day after equities experienced their worst day all year, the convertibles primary market was able to price an upsized offering on Thursday.

Wayfair Inc. priced an upsized $825 million of seven-year convertible notes prior to the market open on Thursday at par with a coupon of 1% and an initial conversion premium of 32.5%, according to a company news release.

Pricing came at the cheap end of talk for a coupon of 0.5% to 1% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The new paper dominated activity in the secondary space.

There was $157 million in reported volume a little over one hour into Thursday’s session.

Wayfair’s new 1% convertible notes due 2026 accounted for $115 million of the total volume.

The new notes were “trading all over the place,” a market source said.

The 1% notes traded as high as 102 and as low as par with stock off 2% to 3% early in the session.

However, the majority of prints were around the 101 area, a source said.

If hedge players were rolling into the new deal from Wayfair’s outstanding notes, they would most likely leave their current hedges in the stock in place and mitigate the downside pressure on the bonds, a market source said.

Wayfair stock was $108.30, a decrease of 3.35%, shortly before 11 a.m. ET.

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