Fisker widens talk on convertibles; Avalara, Cloudflare active; Vroom tanks outright

By Abigail W. Adams

Portland, Me., Aug. 12 – The convertibles primary market continued to roll out new offerings with one sizable deal set to price after the market close.

Fisker Inc. plans to price $600 million of five-year green convertible notes after the market close on Thursday.

However, the deal was heard to be struggling during bookbuilding with price talk widening.

Meanwhile, the secondary space was active on Thursday with recent deals and earnings-related volatility continuing to drive trading activity in the space.

Cloudflare Inc.’s 0% convertible notes due 2026 continued to see heavy volume with the notes broaching par and maintaining the dollar-neutral expansion seen on their aftermarket debut.

Avalara Inc.’s 0.25% convertible notes due 2026 continued to improve on an outright and dollar-neutral basis their second day in the secondary space.

Meanwhile, outside of recent issues, Vroom Inc.’s 0.75% convertible notes due 2026 tanked on an outright basis as stock got pummeled post-earnings.

Fisker widens talk

Fisker plans to price $600 million of five-year green convertible notes after the market close on Thursday with revised talk for a coupon of 2.5% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be struggling based on the initial price talk for a coupon of 1.5% to 2% and an initial conversion premium of 40% to 45%.

The deal modeled cheap based on the underwriter’s assumptions of 500 basis points over Libor and a 45% vol.

Using those assumptions, the deal looked 3.51 points cheap at the midpoint of initial talk, a source said.

However, some sources felt the electric vehicle manufacturer deserved a wider credit spread.

Fisker is a highly speculative credit with a bankruptcy in its history, a source said.

Day two

Cloudflare’s 0% convertible notes due 2026 and Avalara’s 0.25% convertible notes due 2026 remained in focus their second day in the secondary space with both notes improving.

Cloudflare’s 0% convertible notes were broaching par in the late afternoon, a source said.

While unchanged on a dollar-neutral basis on Thursday, they maintained the 0.625 point expansion seen by market close on Wednesday.

Cloudflare’s stock traded to a high of $125.78 and a low of $117 before closing Thursday at $122.23, an increase of 2.71%.

Avalara’s 0.25% convertible notes due 2026 continued to post gains on an outright and dollar-neutral basis.

The notes were changing hands at 100.25 versus a stock price of $163.89 early in the session.

They climbed to 101 by the late afternoon.

While the notes fell flat on a dollar-neutral basis on their aftermarket debut on Wednesday, they gained 0.25 point during Thursday’s session.

Avalara’s stock traded to a low of $160.49 and a high of $166.94 before closing the day at $166.06, an increase of 2.33%.

Vroom sinks outright

Vroom’s 0.75% convertible notes due 2026 were the “disaster du jour” of Thursday’s session, a source said.

The notes plunged on an outright basis as stock got pummeled post-earnings.

The convertibles were down about 10 points outright to 89.5 in the late afternoon.

While the notes tanked outright, they were moving in line dollar-neutral, a source said.

Vroom’s stock traded to a high of $36.94 and a low of $30.33 before closing the day at $30.38, a decrease of 19.97%.

The used car retailer reported a loss per share of 48 cents, which was largely in line with expectations.

Revenue was $761.89 million versus analyst expectations for revenue of $651 million.

However, the company reported weak third-quarter guidance.

Vroom is expecting a loss per share of 78 cents to 73 cents versus analyst expectations for a loss per share of 47 cents.

Mentioned in this article:

Avalara Inc. NYSE: AVLR

Cloudflare Inc. NYSE: NET

Fisker Inc. NYSE: FSR

Vroom Inc. Nasdaq: VRM

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