Morning Commentary: Redfin convertible notes hit the aftermarket, skyrocket on debut

By Abigail W. Adams

Portland, Me., Oct. 16 – New paper was in focus in the convertibles secondary space on Friday after the primary market priced what is expected to be the last new deal of the week.

Redfin Corp. priced an upsized $575 million of five-year convertible notes after the market close on Thursday at par with a coupon of 0% and an initial conversion premium of 40%.

Pricing came in line with revised talk for a fixed coupon of 0% and at the rich end of revised talk for an initial conversion premium of 37.5% to 40%.

Initial talk was for a coupon of 0% to 0.5% and an initial conversion premium of 32.5% to 37.5%.

The initial size of the offering was $525 million with a greenshoe of $78.75 million.

The 0% notes dominated trading activity in the secondary space and skyrocketed on debut.

They were marked at 102.5 bid, 103 offered early in the session.

The notes expanded upwards of 3.125 points dollar-neutral, a source said.

Redfin stock traded down to $50.23, a decrease of 3.01%, shortly before 11 a.m. ET.

Concurrently with the convertible notes offering, Redfin repurchased $116.9 million of its 1.75% convertible notes due 2023 for $107.4 million in cash and 2.1 million shares of common stock.

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