Morning Commentary: Luminar, Global Blood Therapeutics convertible offerings in focus

By Abigail W. Adams

Portland, Me., Dec. 14 – The convertibles primary market continued to roll out new offerings in the final weeks of the year despite continued pressure on equities.

Luminar Technologies Inc. plans to price $500 million of five-year convertible notes and Global Blood Therapeutics Inc. plans to price $250 million of seven-year convertible notes after the market close on Tuesday.

The offerings looked cheap based on underwriters’ assumptions although valuations varied based on borrow cost.

Meanwhile, equities remained under pressure early Tuesday in anticipation of the Federal Reserve’s Wednesday announcement where it is expected to take a more aggressive stance in the rollback of pandemic-era stimulus.

The Dow Jones industrial average was down 56 points, or 0.16%, the Nasdaq Composite was down 1.29%, and the S&P 500 index was down 0.79% shortly before 11 a.m. ET.

However, the Russell 2000 index, while launching the day down more than 1%, turned positive as the session progressed and was up 0.3% shortly before 11 a.m. ET.

Activity in the secondary space was again muted early Tuesday with $83 million in reported volume about one hour into the session and few names seeing concentrated trading activity.

Luminar on tap

Luminar Technologies 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 32.5% to 37.5%.

The deal was heard to be in the market with assumptions of 450 basis points over Libor and a 42% vol., according to a market source.

The borrow on the stock is 1% and is expected to become worse given the company’s stock buyback plans.

Factoring in a 1% borrow, the deal looked 1.12 points cheap at the midpoint of talk, a source said.

However, factoring in a borrow rebate of negative 0.36%, the deal looked 2.25 points cheap at the midpoint of talk, another source said.

The Orlando, Fla-based autonomous vehicle software company plans to use proceeds, in part, to repurchase up to $250 million of class A common stock.

Global Blood eyed

Global Blood Therapeutics plans to price $250 million of seven-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.375% to 1.875% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 550 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked 2.46 points cheap at the midpoint of talk assuming a negative rebate rate of 0.05%, a source said.

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