Morning Commentary: Coupa Software convertibles on tap; Altair, Q2 Holdings hit market

By Abigail W. Adams

Portland, Me., June 6 – The convertibles primary market has been active with a flurry of deals that are capitalizing on a rally in equities.

Coupa Software plans to price $500 million of six-year convertible notes after the market close on Thursday.

The deal looks cheap and is from a company that is well liked in the convertibles space, a source said.

While market players eyed Coupa’s offering, new paper from Q2 Holdings Inc. and Altair Engineering Inc. hit the secondary space.

Both deals were in demand during bookbuilding and were trading up on debut.

Coupa eyed

Coupa plans to price $500 million of six-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 30% to 35%, according to a market source.

The deal looked cheap and is from “a great name with a great story,” a market source said.

The borrow on the stock is also good.

The San Mateo, Calif.-based cloud platform for business spend management is a repeat issuer of convertible notes and was part of the wave of technology companies to tap the market in 2018.

Coupa’s outstanding 0.375% convertible notes due 2023 have skyrocketed since pricing in January 2018. The 0.375% notes were last seen trading at 264.58.

The notes largely trade in line with its stock, a source said.

Q2 notes expand

Q2 Holdings priced an upsized $275 million of seven-year convertible notes after the market close on Wednesday at par with a coupon of 0.75% and an initial conversion premium of 27.5%.

Pricing came at the rich end of revised price talk of 0.75% to 0.875% and an initial conversion premium of 27.5%, according to a market source.

Initial price talk was for a coupon of 0.75% to 1.25% and an initial conversion premium of 25% to 30%.

The greenshoe was also upsized to $41.25 million.

The initial size of the deal was $200 million with a greenshoe of $30 million.

The notes priced concurrently with an upsized 2,637,986 share offering of common stock, which priced at $69.50 per share.

The notes saw a large dollar-neutral expansion out of the gate.

The 0.75% notes traded up to 101.5 on an outright basis with stock largely unchanged from their secondary offering, a market source said.

The notes were up about 1 point dollar-neutral.

There were lots of swap trades on the tape, the source said.

Q2 stock was $69.57, a decrease of 1.19%, shortly before 11 a.m. ET.

Altair trades up

Altair Engineering priced an upsized $200 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 0.25% and an initial conversion premium of 30%.

Pricing came at the midpoint of talk for a coupon of 0.125% to 0.375% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The notes also traded up to 101.5 shortly after the opening bell, even as stock declined, a market source said.

The trading activity was largely driven by outright accounts, a source said.

Altair stock was $35.26, a decrease of 1.43%, shortly before 11 a.m. ET.

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