Morning Commentary: Snap preps convertible notes offering; existing issues come in

By Abigail W. Adams

Portland, Me., Feb. 8 – The convertibles primary market returned to action on Tuesday with the largest deal of 2022 on deck.

Snap Inc. plans to price $1.25 billion of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.125% to 0.625% and an initial conversion premium of 45% to 50%.

The deal was heard to be in the market with assumptions of 225 basis points over Libor and a 45% vol., according to a market source.

Using those assumptions, the deal looked about 1.5 points cheap at the midpoint of talk, sources said.

Snap is a well-known name in the convertibles universe and has been in focus recently with the company’s stock and convertible notes volatile surrounding earnings.

After closing last week strong, Snap’s 0% convertible notes due 2027 and 0.75% convertible notes due 2026 were again coming in on the heels of the new offering.

The 0% convertible notes were down about 3.5 points outright with stock off about 6%.

They were changing hands at 86.125 versus a stock price of $35.20 early in the session.

There was $12 million in reported volume.

The 0.75% convertible notes were down about 8 points outright. They were changing hands at 176.75 versus a stock price of $36.37.

There was about $3 million in reported volume.

Snap’s stock was changing hands at $35.73, a decrease of 5.68%, shortly before 11 a.m. ET.

Snap’s stock cratered 25% in the run up to its earnings report and jumped 58% after earnings came out.

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