Dropbox on tap; Expedia notes in focus; MicroStrategy down outright, up dollar-neutral

By Abigail W. Adams

Portland, Me., Feb. 22 – The convertibles primary market leapt into action on Monday with one large offering on deck.

Dropbox Inc. plans to price $1.135 billion of convertible notes in five- and seven-year tranches after the market close on Tuesday.

Meanwhile, it was a relatively quiet start to the week in the convertibles secondary space with equities volatile as rising Treasuries and concern over inflation put pressure on risk assets.

While all indexes launched the day with losses, the Dow Jones industrial average closed the day up 27 points.

The S&P 500 closed the day down 0.77% after briefly flirting with positive territory, and the Nasdaq closed the day down 2.46% with the sell-off in equities concentrated in the tech sector.

The secondary space saw $66 million in reported volume about one hour into the session and $768 million in reported volume at the market close.

While the tech sector was under pressure, the reopening trade was alive and well with travel and leisure names up big on the day, a source said.

Expedia Group Inc.’s 0% convertible notes due 2026 continued to dominate the tape although the notes were largely unchanged.

MicroStrategy Inc.’s 0% convertible notes due 2027 also remained active with the notes down outright but expanding dollar-neutral as the company’s stock continued to trend lower.

Liberty Media Corp.’s 0.5% notes due 2050 exchangeable for Live Nation Entertainment Inc.’s common stock were posting gains on an outright and dollar-neutral basis.

Dropbox on deck

Dropbox plans to price $1.135 billion of convertible notes in five- and seven-year tranches.

The deal consists of a $567.5 million tranche of five-year convertible notes with price talk for a fixed coupon of 0% and an initial conversion premium of 55% to 60%, according to a market source.

The deal also consists of a $567.5 million tranche of seven-year convertible notes with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 47.5% to 52.5%.

J.P. Morgan Securities LLC (lead left), Goldman Sachs & Co. LLC, RBC Capital Markets LLC and BofA Securities Inc. are joint bookrunners for the Rule 144A offering.

Both tranches carry a greenshoe of $56.75 million.

Expedia in focus

Expedia’s 0% convertible notes due 2026 continued to dominate the tape on Monday.

However, the notes were largely unchanged in the high-volume activity.

The 0% convertible notes were wrapped around 108.25 in active trading for most of the session.

They were changing hands at 108 versus a stock price of $160.42 heading into the market close.

There was more than $39 million in reported volume during Monday’s session, making them the most actively traded issue in the secondary space.

Expedia’s stock traded to a low of $157.56 and a high of $166.57 before closing the day at $160.61, an increase of 1.06%.

The reopening trade

Liberty Media’s 0.5% notes due 2050 exchangeable for Live Nation’s common stock returned to focus on Monday with the notes posting gains on an outright and dollar-neutral basis.

The 0.5% exchangeable notes were up 1 point.

They were changing hands at 120.5 versus a stock price of $88.71.

The notes expanded 0.5 point dollar-neutral, a source said.

There was almost $14 million in reported volume.

Live Nation’s stock traded to a high of $91.38 and a low of $87.20 before closing the day at $88.85, an increase of 0.86%.

MicroStrategy active

MicroStrategy’s 0% convertible notes due 2027 were down outright but up dollar-neutral with the company’s stock under pressure as Bitcoin prices plunged.

The 0% convertible notes dropped 2.5 points outright with stock off more than 9%.

They were changing hands at 101.875 versus a stock price of $890.48 in the late afternoon.

The notes expanded 0.5 point on the move down, a source said.

The notes remained active with more than $20 million in reported volume during Monday’s session.

MicroStrategy’s stock traded to a high of $932.28 and a low of $865 before closing the day at $876, a decrease of 9.10%.

In addition to a broad sell-off in the tech sector, MicroStrategy’s stock was under pressure as Bitcoin sold off in intraday activity.

Bitcoin was down almost 10% with prices briefly dropping below $50,000 before rebounding to $54,909 at the close of equity markets.

Mentioned in this article:

Dropbox Inc. Nasdaq: DBX

Expedia Group Inc. Nasdaq: EXPE

Live Nation Entertainment Inc. NYSE: LYV

MicroStrategy Inc. Nasdaq: MSTR

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