Morning Commentary: MicroStrategy, Expedia convertible notes hit aftermarket, trade up

By Abigail W. Adams

Portland, Me., Feb. 17 – The convertibles secondary space opened Wednesday with $1.8 billion in new paper flooding the space.

Expedia Group Inc. priced an upsized $900 million of five-year convertible notes (Baa3/BBB-/BBB-) and MicroStrategy Inc. priced an upsized $900 million of six-year convertible notes after the market close on Tuesday.

Both deals were in hot demand during bookbuilding.

The demand followed them into the secondary space where both were trading up on debut despite a down day for equities.

Expedia’s record

Expedia priced an upsized $900 million of five-year convertible notes (Baa3/BBB-/BBB-) after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 72.5%.

Pricing came in line with initial talk for a fixed coupon of 0% and richer than revised talk for an initial conversion premium of 72.5%, according to a market source.

Initial price talk was for a fixed 0% coupon and an initial conversion premium of 57.5% to 62.5%; however, talk tightened during bookbuilding to an initial conversion premium of 65% to 70%.

The conversion premium on the notes is among the highest in recent history, according to Prospect News data.

However, the notes skyrocketed in the aftermarket despite their tight pricing.

The 0% notes traded as high as 105.25 early in the session. They were changing hands at 104.375 about one hour after the opening bell.

Expedia’s stock was changing hands at $147.34, a decrease of 0.32%, shortly before 11 a.m. ET.

MicroStrategy active

MicroStrategy priced an upsized $900 million of six-year convertible notes after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 50%.

Pricing came at the rich end of talk for a coupon of 0% to 0.5% and an initial conversion premium of 45% to 50%, according to a market source.

The notes traded in a range of par to 103 early in the session. They were changing hands at 101.25 about one hour into the session, according to a market source.

MicroStrategy’s stock continued to sell off on Wednesday.

Stock was $904.36, a decrease of 5.3%, shortly before 11 a.m. ET.

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