Morning Commentary: Convertible primary caps one of the busiest weeks YTD; Shockwave jumps on debut

By Abigail W. Adams

Portland, Me., Aug. 11 – After an extended drought when no deals cleared the market in July, the convertible bond primary market unleashed one of the busiest weeks of the year with $3.535 billion pricing in six deals.

Shockwave Medical Inc. capped the high-volume week and priced an upsized $650 million in five-year convertible notes after the market close on Thursday.

The deal lifted the weekly tally to $3.535 billion which priced over six deals.

The Aug. 7 week ties for the busiest week of the year by number of transactions and the third busiest week of the year by dollar amount, although it is in the running for the second busiest if all or some of the greenshoes are exercised.

The convertible secondary space remained active early Friday as Shockwave Medical’s new paper made an aftermarket debut.

The new paper hit the secondary space on the heels of more inflationary data with the Producer Price Index report coming in hotter than expected.

The report trails the Consumer Price Index report which came in below estimates although it still reflected an increase in inflation.

Treasuries were weak and equity indexes were mixed following the latest data with the Dow Jones industrial average up 158 points, or 0.45%, the S&P 500 index up 0.06%, the Nasdaq Composite index down 0.29% and the Russell 2000 index up 0.19% shortly before 11 a.m. ET.

Shockwave’s new convertible notes dominated activity in the secondary space with the notes jumping on an outright and dollar-neutral basis.

Shockwave Medical in demand

Shockwave Medical priced an upsized $650 million in five-year convertible notes after the market close on Thursday at par at the rich end of talk with a coupon of 1% and an initial conversion premium of 30%.

Price talk was for a coupon of 1% to 1.5% and an initial conversion premium of 25% to 30%.

The greenshoe was also upsized greenshoe of $100 million.

The initial size of the offering was $500 million with a greenshoe of $75 million.

The strong demand for the notes seen during bookbuilding followed them into the secondary space with the notes jumping on debut.

The 1% notes traded up to 102.375 out of the gate and continued to climb as the session progressed.

They were changing hands at 103.125 about one hour into the session.

The notes expanded about 2.5 points dollar-neutral, a source said.

There was $37 million in reported volume.

Shockwave Medical stock was trading at $222.94, an increase of 0.26%, shortly before 11 a.m. ET.

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