Cracker Barrel, NextEra, Vroom on deck; Western Digital active; MicroStrategy gains

By Abigail W. Adams

Portland, Me., June 14 – The convertibles primary market saw an active start to the week with three deals totaling $1.275 billion on deck.

In an overnight offering, NextEra Energy Partners LP plans to price $500 million of three-year convertible notes after the market close on Monday.

Cracker Barrel Old Country Store Inc. is in the market with a $275 million offering and Vroom Inc. with a $500 million offering, which are slated to price after the market close on Tuesday.

Meanwhile, the secondary space saw a quiet start to the week with $92 million on the tape about one hour into the session and $380 million in reported volume shortly before the market close.

Monday was a strong day for growth stocks with the Nasdaq Composite outperforming and setting a fresh closing record of 14,174.14.

While the S&P 500 index spent most of the day in negative territory, a late-session rally pushed the index to a new height of 4,255.15 at the market close.

However, the Dow Jones industrial average closed the day down 0.25%.

While Monday was a strong day for growth stocks, convertibles investors may be on the sidelines waiting to see how the market responds as the Federal Reserve convenes on Tuesday and Wednesday, sources said.

Western Digital Corp.’s 1.5% convertible notes due 2024 were in focus early Monday with the investment-grade convertible notes the top traded name in the secondary space.

The catalyst for the trading activity was unclear. However, the company may be riding the crypto-craze with one of its products needed for mining a new form of crypto-currency.

MicroStrategy Inc.’s 0% convertible bonds due 2027 remained active with the notes improved on an outright basis as stock jumped alongside Bitcoin.

NextEra’s overnight

NextEra Energy Partners plans to price $500 million three-year convertible notes after the market close on Monday with price talk for a fixed coupon of 0%, a fixed initial conversion premium of 20% and a reoffer price of par to 100.5, according to a market source.

The deal was heard to be in the market with assumptions of 190 basis points over Libor and a 27% vol.

Using those assumptions, the fair value of the deal modeled out to 101.49 with a coupon of 0% and an initial conversion premium of 20%, a source said.

For Tuesday

Vroom plans to price $500 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 35% to 40%, according to a market source.

Goldman Sachs & Co. LLC, BofA Securities Inc., Wells Fargo Securities LLC and Allen & Co. LLC are joint bookrunners for the Rule 144A offering, which carries a greenshoe of $75 million.

Cracker Barrel plans to price $275 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.375% to 0.875% and an initial conversion premium of 25% to 30%, according to a market source.

BofA Securities, Goldman Sachs, Truist Securities Inc. and Wells Fargo are joint bookrunners for the Rule 144A offering, which carries a greenshoe of $25 million.

Western Digital active

Western Digital’s 1.5% convertible notes due 2024 were the most actively traded name in the secondary space on Monday although sources struggled to find a catalyst for the trading activity.

The 1.5% notes were changing hands at 109 versus an equity price of $74.87 a little more than one hour after the opening bell, according to a market source.

There was $20 million in reported volume.

After some large-volume trades early in the session, activity in the name petered off, a source said.

The notes were seen changing hands at 108 in the late afternoon although it was an odd-lot trade.

Western Digital’s stock traded as high as $75.51 shortly after the opening bell before turning negative. Stock traded as low as $74.12 but closed the day largely unchanged at $74.71, a decrease of 0.094%.

Stifel Nicolaus raised its price target for the stock to $110 from $98 on Monday, which may have been a catalyst for the trading activity, a source said.

Western Digital’s stock has climbed more than 45% over the past six months.

The hard disk drive manufacturer and data storage company has benefited from the crypto craze with the company’s high-capacity disk drives needed to farm a new cryptocurrency called Chia, which has been touted as a greener alternative to Bitcoin because it utilizes disk storage space for mining as opposed to processing power.

MicroStrategy gains

MicroStrategy’s 0% convertible notes due 2027 improved on an outright basis as the company’s stock rebounded alongside the price of Bitcoin.

The 0% convertible notes rose about 3.5 points outright with stock up more than 15%.

The notes were changing hands at 72.625 versus a stock price of $597.50 in the late afternoon.

There was about $10 million in reported volume.

MicroStrategy’s stock traded to a low of $544 and a high of $605.69 before closing the day at $598.49, an increase of 15.89%.

MicroStrategy’s stock, which has been under pressure, soared on Monday as the price of Bitcoin broke above $40,000 in intraday activity – a key resistance level for the digital currency.

Bitcoin had struggled below $40,000 since late May with technical indicators pointing toward a continued downslide.

However, Bitcoin rallied on Monday after Tesla Inc. CEO Elon Musk again flip-flopped in his support of the digital currency, stating Tesla may accept it as a form of payment in the future if Bitcoin mining becomes greener.

Bitcoin also received a boost from hedge fund manager Paul Tudor Jones, who maintained his bullish stance on the cryptocurrency.

Mentioned in this article:

Cracker Barrel Old Country Store Inc. Nasdaq: CBRL

MicroStrategy Inc. Nasdaq: MSTR

NextEra Energy Partners LP NYSE: NEP

Vroom Inc. Nasdaq: VRM

Western Digital Corp. Nasdaq: WDC

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