fuboTV convertibles skyrocket on debut; American Airlines active; MicroStrategy gains

By Abigail W. Adams

Portland, Me., Jan. 29 – Friday opened with the last new convertible paper of the week entering the secondary space.

fuboTV priced $350 million of five-year convertible notes after the market close on Thursday.

The new paper was in focus and skyrocketed on an outright and dollar-neutral basis.

Meanwhile, the secondary space remained active as the sell-off in equity markets resumed after a brief reprieve the previous session.

American Airlines Group Inc.’s 6.5% convertible notes due 2025 remained active with the notes expanding as the airline’s stock returned to earth after being driven to astronomical levels during the previous session.

MicroStrategy Inc.’s 0.75% convertible notes due 2025 returned to focus in the secondary space with the notes gaining on a dollar-neutral basis as Bitcoin resumed its rally.

fuboTV skyrockets

fuboTV priced $350 million of five-year convertible notes after the market close on Thursday at par at the midpoint of talk with a coupon of 3.25% and an initial conversion premium of 45%.

Price talk was for a coupon of 3% to 3.5% and an initial conversion premium of 42.5% to 47.5%, according to a market source.

The new paper skyrocketed on an outright and dollar-neutral basis.

It traded to a high of 111 shortly after the opening bell and was changing hands at 107 about one hour into the session.

The notes were marked at 106.5 bid, 107.5 offered versus a stock price of $42 in the late afternoon.

They expanded upwards of 4.5 points dollar-neutral, a source said.

The offering was tightly allocated, “but numerous people are clamoring to get them,” a source said.

The demand was driving up the level of the notes.

fuboTV’s stock was also posting gains despite the sell-off in the broader market.

Stock traded to a high of $46.35 and a low of $40.50 before closing the day at $42.25, an increase of 6.02%.

The new convertibles paper comes from a name in the thick of the drama that has captivated the street over the past week as retail traders go to battle with short-sellers.

The New York-based sports-first live TV streaming platform is a heavily shorted name and a potential target for the retail traders, which one source branded the “Reddit Army.”

The offering was well-received during bookbuilding although there was trepidation that holders who put the name up on hedge would be unable to maintain their borrow if retail traders purposely drove up the price of stock to GameStop levels.

fuboTV has been frequently mentioned in Reddit’s online chatroom WallStreetBets, and the company’s stock has been the source of bullish unusual options activity throughout January.

Stock has been extremely volatile over the past two months. It hit a 52-week high of $62 on Dec. 22 following its fourth-quarter earnings report but tumbled down to close 2020 at $28.

While a long-range concern, there were no issues with the borrow on Friday.

American Airlines active

American Airlines’ 6.5% convertible notes due 2025 remained active with the notes down outright but expanding dollar-neutral as stock returned to Earth after being driven up by retail traders the previous session.

The 6.5% notes dropped about 5 points outright to close Friday at 135.875, according to Trace data.

They expanded upwards of 1 point dollar-neutral, a source said.

American Airlines’ stock traded to a high of $18.73 and a low of $16.75 before closing the day at $17.17, a decrease of 5.14%.

Stock was returning to reasonable levels after being drive up as much as 22% in intraday activity the previous session.

American, the most heavily shorted name among airlines, has become a target of the “Reddit Army.”

Due to the rapid increase of its stock price, American Airlines announced it would price a $1 billion secondary offering on Friday.

“That was a smart move by management,” a source said.

Bitcoin returns

MicroStrategy’s 0.75% convertible notes due 2025 returned to focus on Friday with the notes posting gains on an outright and dollar-neutral basis as the company’s stock resumed its rally.

The deep in-the-money 0.75% notes were volatile on an outright basis, hitting a high of 193 and a low of 169.25 before closing the day at 181.375, according to Trace data.

However, they expanded 1.5 points dollar-neutral.

MicroStrategy’s stock traded to a high of $696.48 and a low of $607.5 before closing the day at $617.31, an increase of 6.73%.

The fate of MicroStrategy’s stock is intertwined with Bitcoin with the company heavily invested in the cryptocurrency.

MicroStrategy priced a $650 million issue of the 0.75% convertible notes due 2025 in early December with proceeds being used to purchase Bitcoin.

The notes priced before Bitcoin’s astronomical rally, which lifted the digital currency to its highest ever price of $41,940 in early January.

While Bitcoin has been under pressure over the past few sessions, its upward momentum resumed on Friday with the digital currency hitting an intraday high of $38,413 after briefly dipping below $30,000 on Thursday.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

fuboTV NYSE: FUBO

MicroStrategy Inc. Nasdaq: MSTR

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