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Morning Commentary: Q2 trades up in gray market; Okta looks cheap; Wayfair tanking, up on swap
By Abigail W. Adams
Portland, Me., Feb. 22 – Q2 Holdings Inc.’s newly priced 0.75% convertible notes due 2023 were trading up in the gray market, according to a market source. The notes were seen up 1.5 points before the opening bell.
Q2 priced $200 million of five-year convertible notes prior to the market open on Thursday at par with a coupon of 0.75% and an initial conversion premium of 27.5%.
Pricing came at the rich end of talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 22.5% to 27.5%.
Okta Inc. plans to price $300 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.25% to 0.75% and an initial conversion premium of 27.5% to 32.5%, according to a market source.
The deal is being marketed with a credit spread of 300 basis points over Libor and a 40% volatility, according to a market source. “They model cheap,” a market source. “It looks like a good deal.”
Meanwhile, Wayfair Inc.’s 0.375% convertible notes due 2022 were tanking alongside its stock after releasing its fourth-quarter and year-end reports prior to the market open.
The convertible notes dropped more than 10 points on an outright basis to trade at 102 with stock down about 18%.
However, the notes were up about 0.75 point on swap, a market source said.
Wayfair reported a diluted net loss per share of 83 cents and non-GAAP diluted net loss per share of 58 cents for the fourth quarter, which was wider than expected.
Wayfair reported a diluted net loss per share of $2.81 and non-GAAP diluted net loss per share of $1.97 for 2017.
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