Bilibili’s new convertibles expand on debut; iQIYI, Citrix active; Chegg breaks par

By Abigail W. Adams

Portland, Me., April 3 – The convertibles secondary market was active on Wednesday with new paper entering the space.

Bilibili Inc. priced an upsized $430 million of seven-year convertible notes prior to the market open.

The new paper dominated trading activity and saw a large dollar-neutral expansion on debut.

While focus shifted to Bilibili, competitor iQIYI Inc.’s 2% convertible notes due 2025 remained major volume movers.

The notes were coming in on an outright basis as stock dropped.

Citrix Systems Inc.’s 0.5% convertible notes, which mature on April 15, were again major volume movers in the secondary space.

With the notes in their averaging period, stock shot up about 7% in intraday trading on speculation the company was putting itself up for sale.

Chegg Inc.’s 0.125% convertible notes due 2025 broke par in active trading on Wednesday with the notes improving alongside stock.

Bilibili expands

Bilibili priced an upsized $430 million of seven-year convertible notes on Wednesday at par with a coupon of 1.375% and an initial conversion premium of 37.5%.

Pricing came at the rich end of talk for a coupon of 1.375% to 1.875% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The greenshoe was also upsized to $70 million. The initial size of the deal was $300 million with a greenshoe of $45 million.

Concurrent with the convertible notes offering, the company priced an upsized offering of 11,473,813 American Depositary Shares and certain shareholders priced an additional 6,526,487 ADSs at $18.

The ADS offering carries an upsized greenshoe of 2,700,000 shares.

The initial size of the company’s ADS offering was 10,554,000 shares with a greenshoe of 2,526,028 shares.

The new paper dominated activity in the secondary space and was trading up out of the gate. It was seen changing hands at 102 versus an equity price of $18.43 early in the session.

The notes remained wrapped around 102 for much of the afternoon.

They expanded 1.25 to 1.5 points dollar-neutral, a market source said.

Bilibili’s ADSs traded as high as $18.60 but closed the day at $18.08, an increase of 0.17%.

More than $36 million of the bonds were on the tape less than one hour into Wednesday’s session. By the late afternoon, that number climbed to $140 million.

Some sources were surprised at the performance of the notes.

While the deal modeled cheap based on underwriters’ assumptions of a credit spread of 500 basis points over Libor, it looked rich with a wider credit spread, which some felt the Shanghai-based online entertainment company deserved.

However, the deal was both a Rule 144A and Regulation S offering which increased its audience and demand.

iQIYI remains in focus

While Bilibili’s new 1.375% convertible notes were the most active in the secondary space, competitor iQIYI’s 2% convertible notes due 2025 remained major volume movers.

The notes from the Beijing-based online entertainment service provider were changing hands at 106.625 with more than $21 million of the bonds on the tape about one hour into Wednesday’s session.

The notes dropped alongside stock into the afternoon and were changing hands at 105.5 about one hour before the closing bell.

iQIYI’s ADSs closed Wednesday at $23.98, a decrease of 1.72%.

Citrix active

Citrix Systems’ soon-to-mature 0.5% convertible notes were again active in the secondary space with the notes maturing on April 15.

With the notes in their averaging period, Citrix stock soared in intraday trading amid renewed rumors the company was putting itself up for sale, a market source said.

The 0.5% notes have largely been trading at parity. They traded up to 143.75 on Wednesday.

Citrix stock rose as high as $107.15 in intra-day trading but closed Wednesday at $103.2, an increase of 3.07%.

News broke on Wednesday that Citrix had enlisted Goldman Sachs to help explore the potential sale of the company causing shares to skyrocket.

Chegg breaks par

Chegg’s 0.125% convertible notes due 2025 were again gaining ground in the secondary space with the notes breaking par in active trading.

The 0.125% notes traded up to 100.25 on Wednesday with more than $15 million of the bonds on the tape.

Chegg stock closed Wednesday at $38.87, an increase of 1.54%.

The notes previously flirted with par but quickly sank back to the 97 level as stock backed off its gains.

The 0.125% notes have struggled since hitting the secondary space on March 22.

While the notes were slightly expanded dollar-neutral, they have floundered outright with the notes hovering around 97 for the majority of their existence.

Mentioned in this article:

Bilibili Inc. Nasdaq: BILI

Chegg Inc. NYSE: CHGG

Citrix Systems Inc. Nasdaq: CTXS

iQIYI Inc. Nasdaq: IQ

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