Morning Commentary: Uber, MicroStrategy convertibles eyed; Uber offering models rich

By Abigail W. Adams

Portland, Me., Dec. 8 – The convertibles primary market was active with two deals set to price after the market close.

Uber Technologies Inc. plans to price $1 billion of five-year convertible notes, and MicroStrategy Inc. plans to price $400 million of five-year convertible notes.

Uber is a household name, and its debut convertible notes offering will help increase the profile of the asset class.

However, the notes modeled rich, a source said.

While MicroStrategy’s notes looked cheap, its use of proceeds was unusual.

Meanwhile, the secondary space continued to see heavy trading volume with $125 million in reported volume shortly before 11 a.m. ET.

NextEra Energy Partners LP’s 0% convertible notes due 2025 were among the top volume movers early in the session with the notes continuing to trade well below their discounted reoffer price.

Uber looks rich

In its debut appearance in the convertibles market, Uber plans to price $1 billion of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.25% and an initial conversion premium of 42.5% to 47.5%.

The deal was heard to be in the market with assumptions of 400 basis points over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked 0.75 point rich at the midpoint of talk.

While the deal looked rich, Uber is a household name, and the deal will increase the visibility of the asset class.

The deal comes as the transportation technology company announced it sold its autonomous-driving unit to Aurora Innovation Inc. for $400 million.

For Bitcoin

MicroStrategy plans to price $400 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be in the market with assumptions of 550 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of talk.

MicroStrategy plans to use proceeds to invest in Bitcoin, which is unusual.

The success of the offering will be a reflection of investor sentiment about Bitcoin, a source said.

NextEra trades down

NextEra’s 0% convertible notes due 2025 continued to struggle early Tuesday with the trades further below their discounted reoffer price.

The 0% notes were changing hands at 96 on Tuesday with $10 million in reported volume, according to a market source.

NextEra’s stock traded up to $63.18, an increase of 1.82%, in intraday activity.

The energy company priced a $600 million issue of the 0% notes at 98.25 on Nov. 30.

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