Rocket Lab convertibles eyed; Barclays offering on deck; Immunocore higher; Etsy gains

By Abigail W. Adams

Portland, Me., Feb. 1 – The convertibles primary market continued to roll out deals at a steady pace with two offerings slated to price after the market close on Thursday.

Rocket Lab USA Inc. is on deck with a $275 million offering of five-year convertible notes.

The offering modeled several points cheap based on underwriters’ assumptions although the borrow tightened significantly on the heels of the convertible notes offering.

Barclays Bank plc also plans to price $250 million of five-year cash-settled equity-linked notes tied to Microsoft Corp. after the market close.

The synthetic offering was pre-priced and mostly spoken for by a limited group of investors.

The new deal activity comes as equity indexes rebounded from the heavy post-Fed selling of the previous session.

Treasuries rallied on the Fed’s continued rate pause and projected rate cuts with the strength carrying over to Thursday’s session.

However, equities tanked post-Fed with the higher-for-longer narrative squashing expectations for a March rate cut.

Equities pared their losses on Thursday with the Dow Jones industrial average closing up 370 points, or 0.97%, the S&P 500 index closing up 1.25%, the Nasdaq Composite index closing up 1.30% and the Russell 2000 index closing up 1.39%.

There was $98 million in reported convertible bond trading volume about one hour into the session and $531 million on the tape in the late afternoon with high-grade names continuing to drive volume.

However, new paper and topical news diversified the tape.

Immunocore Holdings plc’s 2.5% convertible notes due 2030 continued their strong upward momentum after logging large gains on their aftermarket debut Wednesday.

Etsy Inc.’s convertible notes were also on the rise after an Elliot Investment Management partner secured a seat on the board.

Rocket Lab eyed

Rocket Lab plans to price $275 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 3.75% to 4.25% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 750 basis points over SOFR and a 45% vol.

Using those assumptions, the deal looked almost 8 points cheap at the midpoint of talk, a source said.

However, the borrow on the stock tightened significantly following the offering and stock nosedived during Thursday’s session.

While Rocket Lab has a credit profile that many investors have shunned recently with the company going public in 2021 through a SPAC, the deal was heard to be doing well with demand for new paper strong, sources said.

Rocket Lab’s stock closed Thursday at $4.02, a decrease of 17.11%.

Synthetic on deck

Barclays plans to price $250 million of five-year cash-settled equity-linked notes tied to Microsoft after the market close on Thursday with price talk for an issue price of par, a coupon of 1% and an initial conversion premium of 30%.

The offering comes as a refinancing with proceeds to be used to repurchase up to $225 million of Barclays’ 0% cash-settled notes tied to Microsoft due 2025.

The deal will most likely play to a limited group of investors, a source said.

Immunocore Day 2

Immunocore’s 2.5% convertible notes due 2030 continued to shoot higher in active trade after strong gains on their aftermarket debut.

The 2.5% notes gained another 4 points outright with stock up 5%.

The notes were trading at 111 versus a stock price of $76.53 in the late afternoon, according to a market source. They continued to gain on hedge.

There was $12 million in reported volume.

Immunocore’s stock traded to a low of $71.92 and a high of $76.98 before closing at $75.21, up 4.04%.

Immunocore’s convertible notes offering was heavily oversubscribed with the 2.5% notes shooting as high as 108 and gaining 3 to 4 points dollar-neutral on their aftermarket debut.

Etsy gains

Etsy’s convertible notes were on the rise in active trade on Thursday as stock soared after activist investor Elliot Management secured a seat on the board.

The 0.125% convertible notes due 2027 gained about 1.5 points outright.

The notes were trading at 84.375 versus a stock price of $73.58 early in the session, according to a market source.

They remained wrapped around 84.375 in the late afternoon.

There was $10 million in reported volume.

Etsy’s 0.25% convertible notes due 2028 gained about 1 point to trade up to an 80-handle.

They were changing hands at 80.125 in the late afternoon.

Etsy’s stock traded to a low of $71.38 and a high of $76 before closing at $72.62, an increase of 9.10%.

Mentioned in this article:

Etsy Inc. Nasdaq: ETSY

Immunocore Holdings plc Nasdaq: IMCR

Microsoft Corp. Nasdaq: MSFT

Rocket Lab USA Inc. Nasdaq: RKLB

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