Morning Commentary: Splunk eyed; Livongo, HubSpot hit the aftermarket, expand on debut

By Abigail W. Adams

Portland, Me., June 2 – The convertibles primary market slowed its pace on Tuesday with no deals launching prior to the market open and only one deal on the forward calendar.

Splunk Inc. plans to price $900 million of seven-year convertible notes after the market close on Tuesday.

The software company is a well-known name in the convertibles universe, and the deal is expected to do well.

Meanwhile, new paper from HubSpot Inc. and Livongo Health Inc. hit the aftermarket on Tuesday and were expanding on debut.

Splunk in focus

Splunk plans to price $900 million of seven-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.875% to 1.375% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be in the market with assumptions of 425 basis points over Libor and a 40% vol.

Using those assumptions, the deal modeled about 4.5 points cheap at the midpoint of talk, sources said.

The software company is a well-known name in the convertibles universe and a large cap company with a market cap of more than $30 billion, a source said.

With proceeds to be used to repurchase its outstanding notes, the deal is expected to do well.

Splunk intends to repurchase for cash $500 million of the principal amount of its 0.5% convertible notes due 2023.

The 0.5% notes were active early Tuesday and were changing hands at 140.875 with more than $5 million in reported volume about one hour into the session.

Splunk priced a $1.265 billion tranche of the 0.5% notes due 2023 as part of a two-tranche offering that also included an $862.5 million tranche of 1.125% notes due 2025 in September 2018.

HubSpot jumps

HubSpot priced $400 million of five-year convertible notes after the market close on Monday at par at the midpoint of talk with a coupon of 0.375% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 0.125% to 0.625% and an initial conversion premium of 30% to 35%, according to a market source.

The company also entered into privately negotiated transactions to exchange $272.1 million of the principal amount of its 0.25% convertible notes due 2022 for $283 million in cash and 1.6 million shares.

The new paper was posting gains on an outright and dollar-neutral basis early Thursday.

The 0.375% notes traded up to 105.5 with stock up about 2%.

However, stock came in as the session progressed and was changing hands at $209.43, a decrease of 1.78%, shortly before 11 a.m. ET.

Livongo Health prices

Livongo Health priced an upsized $475 million of five-year convertible notes after the market close on Monday at par with a coupon of 0.875% and an initial conversion premium of 27.5%.

Pricing came toward the rich end of talk for a coupon of 0.75% to 1.25% and at the midpoint of talk for an initial conversion premium of 25% to 30%.

The greenshoe was also upsized to $75 million.

The initial size of the offering was $400 million with a greenshoe of $60 million.

The new paper was also posting gains on an outright and dollar-neutral basis.

The 0.875% notes traded up to 102.875 with stock down more than 1.5% early Tuesday.

Livongo stock was changing hands at $57.80, a decrease of 2.53%, shortly before 11 a.m. ET.

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