Akamai offering in focus; Workiva convertibles struggle on debut; Sea notes active

By Abigail W. Adams

Portland, Me., Aug. 15 – The convertibles primary and secondary markets were active on Tuesday with a $1 billion offering slated to price after the market close and $625 million in new paper making its aftermarket debut.

Akamai Technologies Inc. is on deck with a $1 billion offering of long five-year convertible notes.

The refinancing deal looked good based on underwriters’ assumptions and adopted a unique approach to addressing its convertible notes maturing in 2025.

As market players eyed Akamai’s new offering, new paper from Workiva Inc. made its aftermarket debut.

The new paper sank well below par and fell flat dollar-neutral with the deal’s large upsize and tight pricing dragging down its aftermarket performance.

The notes hit the secondary space on a sloppy day for the market with equity indexes firmly in the red as signs of trouble in China’s economy grow.

The Dow Jones industrial average closed Tuesday down 361 points, or 1.02%, the S&P 500 index closed down 1.16%, the Nasdaq Composite index closed down 1.14% and the Russell 2000 index closed down 1.22%.

There was $603 million in reported volume shortly before the close with the market weak amid the selling in equities and bids getting hit.

While activity was concentrated in Workiva, topical and earnings-related news continued to spark movement in outstanding issues.

Sea Ltd.’s convertible notes were active and holding up well as equity plunged following an earnings miss.

Akamai notes eyed

Akamai plans to price $1 billion of long five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.125% to 1.625% and an initial conversion premium of 22.5% to 27.5%.

The deal was heard to be in the market with assumptions of 125 basis points over SOFR and a 27% vol.

Using those assumptions, the deal looked about 1.5 points cheap at the midpoint of talk, a source said.

While there have been some grumblings about aggressive credit spreads, the pricing was in line with Akamai’s outstanding convertible notes, which trade with an implied credit spread of 100 bps, a source said.

The company is also cash rich with great EBITDA and was recently assigned investment-grade issuer credit ratings.

Moody’s Investors Service assigned Akamai an issuer credit rating of Baa2 and S&P Global Ratings assigned an issuer credit rating of BBB+ last week.

Akamai’s offering is a refinancing with proceeds to be used to repay at maturity a portion of the $1.15 billion outstanding of its 0.125% convertible notes due May 1, 2025 or cover cash amounts due upon their early conversion.

The refinancing stands in contrast to the majority of refinancing deals in the market, which have involved retiring outstanding amounts through privately negotiated transactions with existing holders.

“It’s a little unusual to prefund them,” a source said. “But they know what they’re doing.”

Workiva struggles

Workiva priced an upsized $625 million offering of five-year convertible notes after the market close on Monday at par with a coupon of 1.25% and an initial conversion premium of 30%.

Pricing came at the cheap end of tightened talk for a coupon of 1% to 1.25% and in line with a fixed conversion premium of 30%.

Initial price talk was for a coupon of 1% to 1.5% and an initial conversion premium of 27.5% to 32.5%.

The greenshoe was also upsized to $100 million.

The initial size of the offering was $525 million with a greenshoe of $75 million.

The new paper sank below par in pre-market trading with the notes marked at 99.25 bid, 99.75 offered, sources said.

They improved slightly after the market open with the notes trading at 99.5 bid, par offered with stock off early in the session.

The notes continued to trade below par as the session progressed and were wrapped around 99 in the late afternoon.

They plunged alongside stock shortly before the market close and were marked at 97.75 versus a stock price of $99.38, according to a market source.

While down outright, the notes were largely flat dollar-neutral, sources said.

Workiva’s stock traded to a high of $105.58 and a low of $97.77 before closing at $97.89, down 4.78%.

Workiva’s offering came as a refinancing with proceeds used to repurchase $274 million in principal of its 1.125% notes due 2026 for $397 million in cash in privately negotiated transactions.

Several sources felt the terms of Workiva’s new offering were aggressive with the real value of the deal going to the holders of the outstanding notes that participated in the buyback.

The 1.125% notes were bought back at 144.9706.

Sea’s earnings

Sea’s convertible notes were holding up well in active trade as its equity plunged following a large earnings miss.

The Singapore-based tech conglomerate’s more balanced 2.375% convertible notes due 2025 sank 8 points outright with equity down almost 30%.

The notes were changing hands at 94.5 in the late afternoon.

However, the notes were holding up well on hedge, a source said.

The high-premium 0.25% convertible notes due 2026 were off about 0.5 point outright.

They were seen at 79.875 with the yield about 7.75% in the late afternoon, according to a market source.

Sea’s American Depositary Shares traded to a low of $40.11 and a high of $45.60 before closing at $40.58, a decrease of 28.68%.

Sea’s equity ranked among the top five worst performers of Tuesday’s session after the company reported earnings.

The company beat on the bottom line with earnings per share of 79 cents versus the 71 cents expected.

However, shares tumbled after the company reported revenue of $3.1 billion versus the $3.25 billion expected.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

Sea Ltd. NYSE: SE

Workiva Inc. NYSE: WK

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