Coinbase prices with discount, drops outright, gains dollar-neutral; MicroStrategy sinks

By Abigail W. Adams

Portland, Me., May 19 – The largest convertible bond deal of the month, which comes from a crypto-exchange platform, hit the aftermarket on Wednesday amid a brutal sell-off in digital currencies.

While Coinbase Global Inc. was eyeing a 0% coupon in its price talk, the company priced its $1.25 billion offering of five-year convertible notes at a discount and on the cheap end of talk, measures necessary to get the deal out the door as crypto-currencies plummeted, a source said.

While the new paper traded well below its discounted issue price on its aftermarket debut, the notes were expanding dollar-neutral.

Outside of the new paper, the secondary space was relatively quiet on a volatile day for equities.

There was $600 million in reported volume heading into the market close, a source said.

While equity benchmarks launched the day firmly in the red, they pared their losses heading into the market close.

The Dow Jones industrial average closed the day down 164 points, or 0.8%, the S&P 500 closed the day down 0.29% and the Nasdaq Composite finished down 0.03%.

MicroStrategy Inc.’s convertible notes, the other Bitcoin play in the convertibles market, were also active amid plunging Bitcoin prices.

While both the 0% convertible notes due 2027 and 0.75% convertible notes due 2025 dropped on an outright basis, they were largely unchanged dollar-neutral.

Meanwhile, Sunnova Energy International Inc.’s 0.25% convertible notes due 2026 improved on an outright basis their second day in the secondary space.

Coinbase at a discount

The largest deal of the month came from a crypto-currency exchange on a day when Bitcoin breached a key support and plummeted to its lowest levels since February.

Coinbase priced a $1.25 billion offering of five-year convertible notes with a discounted offer price of 99, a coupon of 0.5% for a yield to maturity of 0.7% and an initial conversion premium of 55%.

The company was eyeing aggressive terms with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 55% to 60%, according to a market source.

However, the deal priced at the cheap end of talk and with a discount in order to get out the door.

“Quite a day to come out with this deal,” a source said.

The 0.5% notes were struggling on an outright basis as Coinbase’s stock tanked alongside cryptocurrencies.

The notes traded as low as 94.5 and as high as 98.875 early in the session.

They were changing hands at 97.5 in the mid-afternoon and rose to trade at 98.25 versus a stock price of $222.63 in the late afternoon, sources said.

While struggling on an outright basis, the notes expanded about 1 point on a dollar-neutral, or hedged, basis.

“Hedge players made out,” a source said.

The notes dominated activity in the secondary space with more than $142.5 million in reported volume.

Coinbase’s stock traded to a low of $208 and a high of $229 before closing the day at $224.80, a decrease of 5.94%.

Bitcoin breached a key technical level and plummeted as low as $31,927.17 early Wednesday but rebounded as the session progressed.

The digital currency was changing hands at $38,745.99, a decrease of 11.04%, at about 5 p.m. ET.

The digital currency Ethereum plummeted in kind and was down to $2,610.09, a decrease of 24.12%, at about 5 p.m. ET.

MicroStrategy down

MicroStrategy’s convertible notes continued their downward trajectory on Wednesday as Bitcoin plunged.

The 0% convertible notes due 2027 were down 3.625 points outright with stock off more than 6%.

They were changing hands at 71.5 versus a stock price of $449.19 in the late afternoon, according to a market source.

There was about $20 million in reported volume.

MicroStrategy’s 0.75% convertible notes due 2025 dropped more than 9 points outright. They were changing hands at 136.5 versus a stock price of $450.70 in the late afternoon.

There was about $12 million in reported volume.

While down outright, the notes were largely unchanged dollar-neutral.

MicroStrategy’s stock traded to a high of $458.49 and a low of $411.58 before closing the day at $454.86, a decrease of 6.64%.

Proceeds from both convertible notes offerings were used to purchase Bitcoin.

Sunnova day two

After a lackluster secondary market debut on Tuesday, Sunnova’s 0.25% convertible notes due 2026 improved on both an outright and dollar-neutral basis.

The 0.25% convertible notes popped above par and were changing hands at 100.375 versus a stock price of $27.48 in the late afternoon.

Sunnova’s stock traded to a low of $25.51 and a high of $27.91 before closing the day at $27.87, an increase of 4.77%.

Mentioned in this article:

Coinbase Global Inc. Nasdaq: COIN

MicroStrategy Inc. Nasdaq: MSTR

Sunnova Energy International Inc. NYSE: NOVA

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.