Morning Commentary: Zendesk, LivaNova eyed; Coupa below par; RealReal, Eventbrite upsize

By Abigail W. Adams

Portland, Me., June 11 – The convertibles primary market new deal activity continued at a dizzying pace with two offerings set to price after the market close on Thursday and three making their aftermarket debut.

Zendesk Inc. became the latest software company to launch a megadeal with proceeds to be used to buy back its outstanding convertible notes.

The customer service software company plans to price $1 billion of five-year convertible notes after the market close on Thursday with the offering looking cheap based on underwriters’ assumptions.

LivaNova plc is also on deck with an offering of $250 million long five-year exchangeable notes.

As market players eyed the two deals remaining on the forward calendar, new paper from Coupa Software Inc., RealReal Inc. and Eventbrite Inc. made their aftermarket debut.

While the deals played to healthy demand during bookbuilding with each deal upsizing, the new paper hit the secondary space on a brutal day for equities.

The Dow Jones industrial average was down 3.62%, the S&P 500 index down 2.9% and the Nasdaq composite down 1.86% early in the session on the heels of the latest unemployment claim numbers.

While new paper from Eventbrite and RealReal was not active, new paper from Coupa dropped below par with stock off early in the session.

Zendesk eyed

Zendesk plans to price $1 billion of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.125% to 0.625% and an initial conversion premium of 32.5% to 37.5%.

The deal was being marketed with assumptions of 425 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 2 points cheap at the midpoint of talk, a source said.

Zendesk intends to enter into privately negotiated transactions to repurchase for cash up to $460 million of the principal amount of its 0.25% convertible notes due 2023.

The 0.25% convertible notes saw some activity early Thursday with the notes trading up several points outright to 151 even as stock dropped.

The deal was being marketed as Zendesk stock took a hit on news the company’s chief operating officer was leaving his post effective June 30 to join another firm.

Zendesk stock was changing hands at $83.59, a decrease of 5.8%, shortly before 11 a.m. ET.

LivaNova looks cheap

LivaNova plc plans to price $250 million of long five-year exchangeable notes after the market close on Thursday with price talk for a coupon of 2.5% to 3% and an initial exchange premium of 30% to 35%, according to a market source.

The notes will be issued by LivaNova USA Inc. and exchangeable for LivaNova plc shares.

The deal was heard to be marketed with assumptions of 800 bps over Libor and a 40% vol.

Using those assumptions, the deal looked 3.25 points cheap at the midpoint of talk.

Coupa below par

Coupa Software priced an upsized $1.2 billion of six-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 0.375% and an initial conversion premium 32.5%.

Price talk was for a coupon of 0.125% to 0.625% and an initial conversion premium of 30% to 35%, according to a market source.

The greenshoe was also upsized to $180 million.

The initial size of the offering was $1.1 billion with a greenshoe of $165 million.

While Coupa’s new paper played to healthy demand during bookbuilding, the notes were trading below par on their aftermarket debut.

The notes were changing hands on a 99-handle with stock off more than 2% about one hour into the session.

Proceeds from the new offering were used to repurchase for cash a portion of its outstanding 0.375% convertible notes due 2023 in privately negotiated transactions.

Coupa’s outstanding 0.375% notes due 2023 were changing hands at 502.875 early Thursday.

Coupa stock traded to a low of $216.01 and a high of $225.67 early Thursday. It was changing hands at $221.02, a decrease of 1.22%, shortly before 11 a.m. ET.

RealReal upsizes

The RealReal priced an upsized $150 million of five-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 3% and an initial conversion premium of 27.5%.

The greenshoe was also upsized to $22.5 million.

The initial size of the offering was $125 million with a greenshoe of $18.75 million.

Price talk was for a coupon of 2.75% to 3.25% and an initial conversion premium of 25% to 30%, according to a market source.

Eventbrite upsizes

Eventbrite sold an upsized $130 million of long five-year convertible notes after the market close on Wednesday at par at the cheap end of talk with a coupon of 5% and an initial conversion premium of 17.5%.

Price talk was for a coupon of 4.5% to 5% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The greenshoe was also upsized to $20 million.

The initial size of the offering was $115 million with a greenshoe of $17.25 million.

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