Pindoudou on tap; Guardant Health tightens talk; Liberty Media, Royal Caribbean gain

By Abigail W. Adams

Portland, Me., Nov. 16 – The convertibles primary market leapt into action on Monday with two megadeals on deck.

Pinduoduo Inc. plans to price $1.75 billion of five-year convertible notes after the market close on Tuesday, and Guardant Health Inc. plans to sell $1 billion of seven-year convertible notes after the market close on Monday.

While sources were mixed about the attractiveness of Guardant’s offering, it was in demand during bookbuilding with talk tightening.

With the Nov. 16 week the last full week before the Thanksgiving holiday, more deals are expected in the coming days.

However, some sources did not expect the calendar to be overly active.

Meanwhile, in a deja vu from last week, equity benchmarks soared on Monday following positive early data from Moderna’s Covid-19 vaccine clinical trial.

The Dow Jones industrial average and S&P 500 closed at record highs on optimism surrounding the reopening of the economy.

The secondary space was active with more than $100 million in reported volume about one hour into the session.

However, activity dwindled into the afternoon with about $412 million on the tape about one hour before the close.

With fresh news about another promising vaccine, the “reopening trade” was in focus with several names in the travel and entertainment sector on the rise.

Liberty Media Corp.’s 0.5% notes due 2050 exchangeable for Live Nation Entertainment Inc.’s common stock were in focus with the notes improved as Live Nation’s stock again rallied.

Royal Caribbean Cruises Ltd.’s 2.875% convertible notes due 2023 were also on the rise in active trading.

Pinduoduo on deck

Pinduoduo plans to price $1.75 billion of five-year convertible notes after the market close on Tuesday with price talk for a fixed coupon of 0% and an initial conversion premium of 40% to 50%, according to a market source.

Goldman Sachs (Asia) LLC, BofA Securities Inc. and China Renaissance Securities (Hong Kong) Ltd. are bookrunners for the registered offering, which carries a greenshoe of $250 million.

The deal is pricing concurrently with a secondary offering of 22 million American Depositary Shares.

Guardant Health eyed

Guardant Health plans to price $1 billion of seven-year convertible notes after the market close on Monday.

While sources were mixed on the offering, the deal was in demand during bookbuilding with price talk tightening to a yield of 0% to 0.25% and an initial conversion premium of 30% to 32.5%, according to a market source.

Initial price talk was for a coupon of 0% to 0.5% and an initial conversion premium of 27.5% to 32.5%.

The deal was marketed with assumptions of 450 basis points over Libor and a 40% vol.

Using those assumptions, sources pegged the deal 0.54 point to 0.64 point cheap at the midpoint of initial talk.

The pricing was tight, sources said.

The size of the offering was also aggressive with the deal size about 10% of the diagnostic oncology company’s $10.43 billion market cap.

The company is also relatively young with its IPO in 2018.

While Guardant Health has negative free cash flow, the company does have cash on the balance sheet.

“People are asking what they’re going to do with the cash,” a source said. “It may mean an acquisition.”

While acquisitions were stated as a potential use of proceeds, the company is not currently in negotiations for such a transaction, the company stated in a press release.

Guardant Health is a competitor of fellow convertible issuer Exact Sciences Inc.

Liberty Media improves

Liberty Media’s 0.5% notes due 2050 exchangeable for Live Nation Entertainment’s common stock were again active as Live Nation’s stock rallied on more positive vaccine news.

The 0.5% exchangeable notes traded as high as 103.25 before settling down to 102.625 early in the session.

The notes remained on a 102-handle for the remainder of the afternoon.

The notes were in line to slightly improved dollar-neutral, a source said.

One source saw them expanded about 0.375 point in the late afternoon.

Live Nation’s stock traded to a high of $69.54 and a low of $66.16 before closing the day at $68.32, an increase of 3.39%.

Royal Caribbean gains

Royal Caribbean’s 2.875% convertible notes due 2023 were on the rise in active trading with the travel and entertainment sectors soaring on news of another promising vaccine.

The notes hit their highest outright level since pricing in mid-October.

They traded as high as 119.5 before closing the day around 118, sources said.

They expanded upwards of 0.5 point dollar-neutral, a source said.

Royal Caribbean’s stock traded to a low of $74.02 and a high of $77.23 before closing the day at $75.50, an increase of 6.96%.

Mentioned in this article:

Guardant Health Inc. Nasdaq: GH

Live Nation Entertainment Inc. NYSE: LYV

Pinduoduo Inc. Nasdaq: PDD

Royal Caribbean Cruises Ltd. NYSE: RCL

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