Square convertibles slip on debut; Teladoc, Fiverr drop in active trade; Esperion on tap

By Rebecca Melvin

New York, Nov. 10 – Three new issues hit the convertibles primary space on Tuesday, including Liberty Media Corp.’s upsized $800 million of 30-year notes exchangeable for Live Nation Entertainment Inc.’s common stock and Square Inc.’s long five-year convertible notes and seven-year convertible notes, which are $500 million each in size.

Liberty’s new paper was not seen in trade, but the underlying Live Nation shares edged higher in trade.

Square’s new issues slipped below par in trade, and the older Square issues were lower amid a $12.01, or 6.5%, decline in the underlying shares.

The convertibles of Teladoc Health Inc. and Fiverr International Ltd. each shed about 5 points on lower shares, according to Trace data. The Teladoc shares lost $5.54, or 3%, to $172.44 and the Fiverr shares plunged $17.27, or 11%, to $136.58.

After the market close, Esperion Therapeutics Inc. announced plans to price a $200 million offering of five-year convertible notes.

The notes of the Ann Arbor, Mich.-based pharmaceutical company were being talked to yield 3.5% to 4% with an initial conversion premium of 20% to 25%, according to a market source.

Square drops

The newly priced Square 0% convertibles due 2026 traded down on their debut and were seen last at 98.724, according to trace data, against underlying shares that were around $172.00 to $172.50.

The Square 0.25% convertibles due 2027 were last seen lower at 97.76 against the same share price.

Square’s shares closed at the $172.00 level, which was down $12.08, or 6.6%, on the day.

Square’s existing 0.125% notes due 2025 fell in active trade. They recouped somewhat in late trade from early losses. They were seen down 7.6 points at 159.44 compared to an early trade that was down 11.6 points at 155.432, according to Trace data.

Another Square issue, its 0.5% convertibles due 2023, tumbled 27 points, albeit on somewhat lighter volume and were seen last at 225.64.

The tech space was weighing on the equity markets as stocks came off following a rally on Monday.

Altogether, $1 billion of new Square convertible senior notes hit the market on Tuesday in two tranches, each with an initial conversion premium of 62.5%.

The $500 million of convertible notes due May 1, 2026 priced with a 0% coupon, and the $500 million of convertible notes due Nov. 1, 2027 priced with a 0.25% coupon.

Price talk for the 2026 notes tightened to a fixed coupon of 0% and an initial conversion premium of 60% to 65%, from initial talk was for a 0% to 0.25% coupon and initial conversion premium of 55% to 60%.

Price talk for the 2027 notes tightened to a fixed coupon of 0.25% and an initial conversion premium of 60% to 65%, from 0.25% to 0.75% initial coupon talk and an initial conversion premium of 55% to 60%.

There is a $75 million greenshoe for each tranche.

Goldman Sachs & Co. LLC is the bookrunner for the Rule 144A offering.

In connection with the pricing of the notes, the company entered into a call spread, or convertible note hedge and warrant transactions, with some of the initial purchasers of the notes. The strike on the warrant transactions is initially about $368.16 per share and about $414.18 per share, representing a premium of about 100% and 125%, respectively, from the issuer’s perspective.

About $49 million of the proceeds will be used to pay the cost of the call spread, and the remaining proceeds will be used for general corporate purposes.

Square is a San Francisco-based financial services and mobile payment company.

Liberty upsizes

The Liberty bonds exchangeable into Live Nation were upsized by $200 million to $800 million. The underlying shares of the new Liberty/Live Nation exchangeable were holding in better than the Square paper, with only a 20 cent, or 0.3%, slip to trade last at $64.14 at late morning, and by the close they erased losses and were higher.

An older Live Nation 2.5% convertible due 2023 gained ground on Monday in the aftermath of the new deal being launched. It was seen last at 121.38.

The initial exchange price is $90.10 for each share of Live Nation stock, which represents a 40% premium over the closing share price of Live Nation stock on Monday. The coupon priced at the midpoint of 0.25% to 0.75% talk, which was, tightened from initial talk for a 0.5% to 1% coupon, and the premium came at the tightened price point.

Citigroup Global Markets Inc. (lead left), Mizuho Securities USA Inc. and UBS Securities LLC are active bookrunners for the Rule 144A offering.

The notes are non-callable for 3.75 years.

They are putable on Sept. 1, 2024.

Proceeds will be used for general corporate purposes, which may include the repayment of debt, including Liberty Media’s 2.25% exchangeable notes due 2048, and to settle the call spread between Formula One Group and Liberty Sirius XM group related to 34.8 million shares, according to a company news release.

The media company is based in Englewood, Colo.

Live Nation is a Los Angeles-based events promoter and venue operator.

Esperion to price

The shares of Esperion dropped $2.05, or 7.1%, in after-hours trading after closing up $1.15, or 4%, to $28.90 on the day.

The smaller pharmaceutical company with an $805.5 million market capitalization announced it plans to price a $200 million offering of five-year convertible notes, which were being talked to yield 3.5% to 4% with an initial conversion premium of 20% to 25%, according to a market source.

Pricing of the Rule 144A offering, for which there is a $30 million greenshoe, was expected to occur on Wednesday.

The convertible senior subordinated notes are non-callable for three years and then provisionally callable if shares exceed 130% of the conversion price.

The notes were going to be valued using a credit spread of 1,000 basis points over Libor and a 45% vol., according to a market source.

Left lead bookrunner is Morgan Stanley.

Mentioned in this article:

Esperion Therapeutics Inc. Nasdaq: ESPR

Fiverr International Ltd. NYSE: FVRR

Live Nation Entertainment Inc. NYSE: LYV

Snap Inc. NYSE: SNAP

Square Inc. NYSE: SQ

Teladoc Health Inc. NYSE: TDOC

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