Novocure convertible offering in demand, terms tightened; Coupa Software notes active

By Abigail W. Adams

Portland, Me., Nov. 2 –To the surprise of several sources, the convertibles primary market rolled out a new offering on Monday as equity benchmarks rebounded from one of the most dramatic weekly declines since March.

Novocure Ltd. plans to price $500 million of five-year convertible notes after the market close on Monday.

“I don’t think anyone thought we’d have a new deal on election day,” a source said.

However, the deal was in demand during bookbuilding with price talk tightening.

The oncology company is slated to be the latest convertible issuer to price a deal with a 0% coupon, sources said.

Meanwhile, the secondary space saw a decent amount of activity for a Monday.

There was $75 million in reported volume about one hour into the session and $410 million on the tape about one hour before the market close.

Coupa Software Inc.’s 0.375% convertible notes due 2026 were active with the notes coming in on an outright basis but largely unchanged dollar-neutral following an announced acquisition.

Novocure eyed

While the deal came as a surprise to several market sources, Novocure’s planned offering of five-year convertible notes was in demand with talk tightening during bookbuilding.

Novocure plans to price $500 million of five-year convertible notes with talk tightening to a fixed coupon of 0% and an initial conversion premium of 50% to 52.5%, according to a market source.

Price talk was initially for a coupon of 0% to 0.5% and an initial conversion premium of 42.5% to 47.5%.

The deal was heard to be marketed with assumptions of 300 basis points over Libor and a 45% vol., a source said.

Using those assumptions, the deal looked 4.125 points cheap at the midpoint of initial talk, sources said.

The revised pricing took some of the cheapness out of the deal, a source said.

However, some sources saw the credit spread as conservative.

And with the deal playing to heavy demand, it is expected to trade well.

Novocure will become the latest in a slew of recent deals to price with a zero coupon.

Other deals that have priced recently with a zero-coupon include Redfin Corp.’s 0% convertible notes due 2025, Nova Measuring Instruments Ltd.’s 0% convertible notes due 2025, Fiverr International Ltd.’s 0% convertible notes due 2025, and SolarEdge Technologies Inc.’s 0% convertible notes due 2025.

“Down the road this may be shooting the asset class in the foot,” a source said.

However, the convertible market may be in a narrow window where the terms are available and issuers are taking advantage.

Coupa active

Coupa’s 0.375% convertible notes due 2026 were major volume movers during Monday’s session.

While the notes were down outright, they were largely unchanged dollar-neutral as stock sold off following an acquisition announcement.

The 0.375% convertible notes dropped about 5 points outright with stock off 7%.

The notes traded down to 111.75 in the late afternoon.

Coupa’s stock traded to a low of $242.31 and a high of $267.61 before closing the day at $247.29, a decrease of 7.62%.

Stock dropped after the software company announced it was purchasing Llamasoft for $1.5 billion.

Mentioned in this article:

Coupa Software Inc. Nasdaq: COUP

Novocure Ltd. Nasdaq: NVCR

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