Morning Commentary: Canopy Growth convertibles maintain strength; PTC Therapeutics jumps

By Abigail W. Adams

Portland, Me., June 18 – While equity markets opened Monday soft, new paper in the convertibles space maintained recent strength.

Canopy Growth Corp.’s 4.25% convertible notes due 2023 remained active in the secondary space on Monday with the notes continuing to trade between 101 and 102 with stock flat to up slightly, a market source said.

“From everyone’s standpoint, the deal was well done,” a market source said. “There was certainly a lot of demand.”

Canopy Growth priced an upsized C$500 million of the convertible notes at the rich end of talk for a coupon of 4.25% to 4.75% and an initial conversion premium of 20% to 25% prior to the market open on Friday.

The initial deal size had been C$400 million. The greenshoe was also upsized to C$100 million from C$60 million.

While the Rule 144A and Regulation S deal from the Smiths Falls, Ont.-based recreational and marijuana company was “pretty straight-forward” outside of the Canadian currency, “there were some things to consider,” due to the sector, the source said.

Canada is in the final stages of legalizing recreational marijuana and has a country-wide medical marijuana program.

However, laws governing medical and recreational marijuana in the United States vary from state to state and is considered a Schedule 1 drug under federal law.

In terms of investing, funds are establishing their own policies related to the sector, a source said.

Outside of the recent deals, PTC Therapeutics Inc.’s 3% convertible notes were active and jumped more than 4 points outright as the company’s stock skyrocketed early Monday.

The 3% notes were seen at 114¼ bid, 114¾ offered early in the session with stock up more than 25% to $46.97.

While the notes were making large gains on an outright basis, they were largely moving in line dollar-neutral, a market source said.

The spike in stock came after the pharmaceutical company announced positive interim results from a clinical study on risdiplam, an oral drug to treat spinal muscular atrophy in babies.

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