Zendesk, LivaNova notes eyed; Coupa Software, RealReal down outright, up dollar-neutral

By Abigail W. Adams

Portland, Me., June 11 – The convertibles primary market new deal activity continued at a dizzying pace with two offerings set to price after the market close on Thursday and three making their aftermarket debut.

Zendesk Inc. became the latest software company to launch a megadeal with proceeds to be used to buy back its outstanding convertible notes.

The customer service software company plans to price $1 billion of five-year convertible notes after the market close on Thursday.

LivaNova plc is also on deck with an offering of $250 million of long five-year exchangeable notes.

As market players eyed the two deals remaining on the forward calendar, new paper from Coupa Software Inc., RealReal Inc. and Eventbrite Inc. made their aftermarket debut.

The new deal activity came on a brutal day for equities.

Negative headlines about the economic recovery, the latest unemployment claim numbers and a spike in Covid-19 cases sparked what many considered an overdue sell-off.

“We have gotten spoiled by the flow of (relatively) positive news and the market clearly got ahead of itself,” a source said.

The Dow Jones industrial average closed Thursday down 6.9%, the S&P 500 index down 5.89% and the Nasdaq composite down 5.27%.

Zendesk was heard to have widened price talk on its offering although the deal was not expected to have trouble crossing the finish line.

While new paper from RealReal and Coupa dropped below par on an outright basis, they expanded dollar-neutral.

Eventbrite’s new convertible notes were also expanding on debut.

Zendesk eyed

Zendesk plans to price $1 billion of five-year convertible notes after the market close on Thursday.

Price talk was heard to have widened during bookbuilding to a coupon of 0.375% to 0.625% and an initial conversion premium of 32.5%.

Initial price talk was for a coupon of 0.125% to 0.625% and an initial conversion premium of 32.5% to 37.5%.

The deal was being marketed with assumptions of 425 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 2 points cheap at the midpoint of initial talk, sources said.

Zendesk intends to enter into privately negotiated transactions to repurchase for cash up to $460 million of the principal amount of its 0.25% convertible notes due 2023.

The 0.25% convertible notes saw some activity early Thursday with the notes trading up several points outright to 151 even as stock dropped.

The 0.25% notes were pushed out about 1 point dollar-neutral, a source said.

While it was unclear what the final buyback price for the 0.25% notes would be, holders were offering the notes to the company up 4 points, a source said.

In addition to an overall brutal day for the markets, Zendesk stock was taking a hit on news the company’s chief operating officer was leaving his post effective June 30 to join another firm.

The new deal has “some hair on it,” a source said.

However, Zendesk is a well-known name in the convertibles universe, and the buyback of its outstanding notes was helping to support the new offering.

Zendesk stock traded to a low of $79.72 and a high of $84.60 before closing the day at $79.73, a decrease of 10.16%.

LivaNova looks cheap

LivaNova plc plans to price $250 million of long five-year exchangeable notes after the market close on Thursday with price talk for a coupon of 2.5% to 3% and an initial exchange premium of 30% to 35%, according to a market source.

The notes will be issued by LivaNova USA Inc. and exchangeable for LivaNova plc shares.

The deal was heard to be marketed with assumptions of 800 bps over Libor and a 40% vol.

Using those assumptions, the deal looked 3.25 points cheap at the midpoint of talk.

While the deal looked cheap, LivaNova is a new name to the convertibles universe.

Some sources were apprehensive about the offering given the current market climate.

Coupa up dollar-neutral

Coupa Software priced an upsized $1.2 billion of six-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 0.375% and an initial conversion premium 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 greenshoe was also upsized to $180 million.

The initial size of the offering was $1.1 billion with a greenshoe of $165 million.

While Coupa’s new paper played to healthy demand during bookbuilding, it hit the aftermarket on one of the most brutal days for equities since March.

The notes were changing hands on a 99-handle with stock off during Thursday’s session.

While the notes were down on an outright basis, they were expanding dollar-neutral.

Sources pegged their expansion between 0.5 to 1.5 points in intraday trading.

Proceeds from the new offering were used to repurchase for cash a portion of its outstanding 0.375% convertible notes due 2023 in privately negotiated transactions.

Coupa’s outstanding 0.375% notes due 2023 were changing hands at 502.875 early Thursday.

Coupa stock traded to a low of $214.14 and a high of $225.67 before closing the day at $217.97, a decrease of 2.58%.

RealReal down to 95

The RealReal priced an upsized $150 million of five-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 3% and an initial conversion premium of 27.5%.

The greenshoe was also upsized to $22.5 million.

The initial size of the offering was $125 million with a greenshoe of $18.75 million.

Price talk was for a coupon of 2.75% to 3.25% and an initial conversion premium of 25% to 30%, according to a market source.

The notes tanked on an outright basis but were performing well on hedge, sources said.

The 3% notes traded as low as 95.5 in the late afternoon.

While down outright, the notes were up several points dollar-neutral.

Sources pegged their expansion between 1.75 points and 2 points on hedge.

The notes were active for a small issue with more than $61 million on the tape in the late afternoon.

RealReal stock traded to a low of $11.61 and a high of $13.92 before closing the day at $12.06, a decrease of 13.49%.

Eventbrite upsizes

Eventbrite sold an upsized $130 million of long five-year convertible notes after the market close on Wednesday at par at the cheap end of talk with a coupon of 5% and an initial conversion premium of 17.5%.

Price talk was for a coupon of 4.5% to 5% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The greenshoe was also upsized to $20 million.

The initial size of the offering was $115 million with a greenshoe of $17.25 million.

While volume was light, the 5% notes were hanging in above par on Thursday.

They were expanded 2.25 points dollar-neutral in the early afternoon, a source said.

Eventbrite stock traded to a low of $9.75 and a high of $10.47 before closing the day at $10.22, a decrease of 4.66%.

Mentioned in this article:

Coupa Software Inc. Nasdaq: COUP

Eventbrite Inc. NYSE: EB

LivaNova plc Nasdaq: LIVN

RealReal Inc. Nasdaq: REAL

Zendesk Inc. NYSE: ZEN

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