Nio, DocuSign convertible notes on tap; Box tightens talk; Exact Sciences improves

By Abigail W. Adams

Portland, Me., Jan. 11 – The convertibles primary market hit the ground running on Monday with three deals totaling $2.1 billion on tap.

Nio Inc. plans to price $1.3 billion of convertible notes in two tranches and DocuSign Inc. plans to price $500 million three-year convertible notes after the market close on Tuesday.

Box Inc. plans to sell $300 million of five-year convertible notes after the market close on Monday.

The deal was in demand during bookbuilding with talk tightening.

Meanwhile, the secondary space was active on Monday with $89 million in reported volume about one hour into the session and $700 million on the tape heading into the close.

Exact Sciences Corp.’s convertible notes were in focus and posting gains on an outright and dollar-neutral basis as stock skyrocketed despite a down day for equities.

Summit Hotel Properties Inc.’s 1.5% convertible notes due 2026 remained active their second day in the secondary space. However, the notes were largely unchanged.

The calendar

The forward calendar ballooned on Monday with two deals totaling $1.8 billion slated to price after the market close on Tuesday.

Nio plans to sell $1.3 billion of convertible notes in two tranches after the market close on Tuesday.

The deal includes a $650 million tranche of five-year notes with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 45% to 50%, according to a market source.

The deal also includes a $650 million tranche of six-year notes with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 45% to 50%.

Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and China International Capital Corp. Ltd. are joint bookrunners for the Rule 144A offering.

Each tranche carries a greenshoe of $100 million.

DocuSign plans to price $500 million three-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 57.5% to 62.5%, according to a market source.

J.P. Morgan Securities LLC, Morgan Stanley and Goldman Sachs are joint bookrunners for the Rule 144A offering, which carries a greenshoe of $75 million.

Proceeds will be used to repurchase a portion of its 0.5% convertible notes due 2023 through a combination of cash and shares in privately negotiated transactions.

Box eyed

Box’s offering of convertible notes was in demand during bookbuilding with the price talk tightening.

Box plans to price $300 million of five-year convertible notes after the market close on Monday with price talk tightened to a fixed coupon of 0% and an initial conversion premium of 42.5% to 45%, according to a market source.

Initial price talk was for a coupon of 0% to 0.5% and an initial conversion premium of 35% to 40%, according to a market source.

The deal was heard to be marketed with assumptions of 350 basis points over Libor and a 40% vol., a source said.

Using those assumptions, the deal looked 2.23 points cheap at the midpoint of initial price talk.

However, some sources felt the assumptions were aggressive.

“The stock really hasn’t done much,” a source said.

The credit spread also seemed tight. While the company makes money, “the margins are tighter than they should be,” a source said.

The cloud content management and file sharing company’s stock is one of the few in the sector that hasn’t skyrocketed, another source said.

“It’s interesting to look at because the stock hasn’t participated with the rest of the market,” a source said.

Exact Sciences in focus

Exact Sciences’ convertible notes were in focus in the secondary space with the notes gaining on an outright and dollar-neutral basis.

Exact Sciences’ 0.375% convertible notes due 2028 gained about 12 points outright with stock up more than 10%.

The notes were changing hands at 140 versus a stock price of $146 in the late afternoon.

The 0.375% notes due 2027 were changing hands at 149 versus a stock price of $146.

Both tranches were expanded about 0.5 point dollar-neutral, a source said.

The 1% convertible notes due 2025 hit double par during Monday’s session.

However, the 1% notes were largely moving in line with stock.

Exact Sciences’ stock traded to a high of $152.48 and a low of $132.49 before closing the day at $144.

The jump in stock may have been related to the JPMorgan health care conference, which is underway.

A lot of health care companies pre-report at the conference, a source said.

Summit active

Summit Hotel’s 1.5% convertible notes due 2026 remained active their second day in the secondary space.

However, the notes were largely unchanged.

The 1.5% notes were changing hands around 101.5 throughout the session with stock flat.

Summit’s stock traded to a high of $8.72 and a low of $8.48 before closing the day at $8.65, an increase of 0.46%.

Mentioned in this article:

Box Inc. NYSE: BOX

DocuSign Inc. Nasdaq: DOCU

Exact Sciences Corp. Nasdaq: EXAS

Nio Inc. NYSE: NIO

Summit Hotel Properties Inc. NYSE: INN

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