Upstart Holdings, Opendoor convertibles look cheap; Booking in focus; Avalara comes in

By Abigail W. Adams

Portland, Me., Aug. 17 – The convertibles primary market saw an active start to the week with two large offerings set to price after the market close on Tuesday.

Upstart Holdings Inc. plans to price $575 million of five-year convertible notes and Opendoor Technologies Inc. plans to sell $750 million of five-year convertible notes after the market close.

While the deals modeled cheap based on underwriters’ assumptions, the terms remained aggressive with both deals eyeing 0% coupons.

However, with equities selling off on Tuesday, the deals were believed to be coming at the cheap end of talk, a source said.

Meanwhile, trading activity remained subdued in the secondary space with equities firmly in the red.

The Dow Jones industrial average closed the day down 282 points, or 0.79%, the S&P 500 index closed the day down 0.71%, the Nasdaq Composite finished down 0.93% and the Russell 2000 closed down 1.19%.

Booking Holdings Inc.’s convertible notes continued to dominate the tape with the notes switching hands as one of the company’s tranches approaches its maturity.

Avalara Inc.’s 0.25% convertible notes due 2026 were active and coming in on an outright and dollar-neutral basis, which sources attributed to the trading of the greenshoe.

Upstart on tap

Upstart Holdings plans to price $575 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 42.5% to 47.5%.

The deal was in the market with assumptions of 300 basis points over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked 1.55 points cheap at the midpoint of talk.

Books closed in the early afternoon with pricing expected on the cheap end of talk.

Upstart Holdings’ stock skyrocketed after blowing away analyst expectations in its second-quarter earnings report on Aug. 10.

Stock gained almost 50% in a single week and hit a new 52-week high of $213.90 on Monday.

Opendoor eyed

Opendoor Technologies plans to price $750 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%.

The deal was heard to be in the market with assumptions of 450 bps over Libor and a 45% vol.

Using those assumptions, the deal looked 2.55 points to 2.59 points cheap at the midpoint of talk, sources said.

While the company may have warranted a tighter credit spread, its debt ballooned in the previous quarter to $2.29 billion from $733 million, a source said.

The deal is also expected to come on the cheap end of talk.

Opendoor’s stock was under pressure on Tuesday, closing the day at $14.80, a decrease of 9.29%.

The deal is expected to trade well in the secondary.

Booking in focus

Booking Holdings’ convertible notes continued to dominate the tape on Tuesday as the notes switched hands with one tranche quickly approaching its maturity.

The 0.9% convertible notes due Sept. 15, 2021 continued to trade around parity.

The notes were changing hands at 103.625 in the late afternoon.

The activity in the notes were “end-of-life trades,” with fast-money market players buying the notes, sources said.

The 0.75% convertible notes due 2025 continued to trade around 138.625.

Holders were switching from the short-dated notes into the longer duration notes.

Booking’s stock traded to a high of $2,126.20 and a low of $2,093.05 before closing the day at $2,113.27, a decrease of 0.83%.

While the notes continued to see heavy volume, there was little movement in price.

Avalara comes in

Avalara’s recently priced 0.25% convertible notes due 2026 returned to focus on Tuesday with the notes coming in on an outright and dollar-neutral basis.

The 0.25% notes were down more than 1.5 points outright.

They dropped below par and were changing hands at 99.625 in the late afternoon.

The notes contracted about 0.25 point dollar-neutral, a source said.

There was more than $20 million in reported volume.

Avalara’s stock traded to a high of $167.20 and a low of $162.82 before closing the day at $164.77, a decrease of 0.48%.

The notes were trading down as more supply entered the market due to the recent exercise of the greenshoe, a source said.

The greenshoe on the notes was recently exercised in full, lifting the total size of the issue to $977.5 million.

Mentioned in this article:

Avalara Inc. NYSE: AVLR

Booking Holdings Inc. Nasdaq: BKNG

Opendoor Technologies Inc. Nasdaq: OPEN

Upstart Holdings Inc. Nasdaq: UPST

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