Cytokinetics convertibles price, skyrocket on debut; Etsy gains; BridgeBio hits new low

By Abigail W. Adams

Portland, Me., July 1 – It was a quiet start to the new quarter in the convertibles secondary space with the exception of one name – Cytokinetics Inc.

Cytokinetics priced $450 million of five-year convertible notes after the market close on Thursday.

The new paper dominated the tape, accounting for about 25% of the total reported volume during Friday’s session.

The notes surged on both an outright and dollar-neutral basis in heavy volume.

Outside of the new paper, the secondary space was quiet with few names seeing concentrated trading activity.

Equity markets remained volatile on the first trading day of the new quarter. Indexes were in the red early in the session but closed the day with strong gains.

The Dow Jones industrial average closed Friday up 322 points, or 1.05%, the S&P 500 index closed up 1.06%, the Nasdaq Composite index closed up 0.90% and the Russell 2000 index closed up 1.16%.

There was $309 million in reported volume about one hour before the market close with few names seeing concentrated trading activity.

Etsy Inc.’s 0.125% convertible notes due 2026 were active with the notes making large gains alongside stock.

BridgeBio Pharma Inc.’s 2.25% convertible notes due 2029 hit a new all-time low with a large outright seller in the market.

Cytokinetics dominates

Cytokinetics priced $450 million of five-year convertible notes after the market close on Thursday at par at the cheap end of talk with a coupon of 3.5% and an initial conversion premium of 30%.

Price talk was for a coupon of 3% to 3.5% and an initial conversion premium of 30% to 35%, according to a market source.

The deal played to solid demand and the offering could have been upsized, a source said.

However, the deal was a refinancing of the biotech company’s deep-in-the-money 4% convertible notes due 2026 that have been trading at quadruple par.

The company repurchased $116.9 million of its outstanding 4% convertible notes due 2026 for $140.3 million in cash and 8,071,342 shares in privately negotiated transactions.

With the company essentially rolling over its outstanding convertible notes, stock was expected to remain relatively stable.

Word that the deal might upsize sent Cytokinetics’ stock tumbling in late trading on Thursday, and the company opted to keep the deal at its initial size.

However, the demand for the paper followed it into the secondary space with the notes making large gains on an outright and dollar-neutral basis.

The 3.5% notes were marked at 106 bid, 107 offered on an outright basis with stock spiking out of the gate.

However, the notes came in alongside stock as the session progressed.

They were changing hands at 104 versus a stock price of $40.03 in the late afternoon.

The notes expanded 3 points dollar-neutral, sources said.

There was $80.5 million in reported volume.

Cytokinetics’ stock traded to a high of $42.50 and a low of $38.54 before closing the day at $41, an increase of 4.35%.

The biotech company’s stock is trading at an elevated level compared to the overall market because a drug in its pipeline is on the verge of approval.

Etsy improves

Etsy’s 0.125% convertible notes due 2026 made large outright gains in active trading on Friday.

The 0.125% notes rose 4 points outright with stock up 9%.

They traded as high as 119 early in the session but came in as the session progressed.

The notes were changing hands at 117.625 versus a stock price of $79.03 in the late afternoon.

There was $8 million in reported volume.

Etsy’s stock traded to a low of $74.70 and a high of $80.75 before closing the day at $79.81, an increase of 9.02%.

Etsy’s stock skyrocketed after analysts from Raymond James and Evercore ISI commented on the stock, which they see as trading at a discount.

BridgeBio’s new low

BridgeBio’s 2.25% convertible notes due 2029 traded down to an all-time low on Friday despite a strong day for the company’s stock.

The 2.25% notes traded down to 40½ with the yield on the notes now 18%.

There was $5 million in reported volume.

The notes were active with a large outright seller exiting its position in the company, a source said.

While the convertible notes are not equity sensitive, BridgeBio’s stock made large gains on Friday, closing the day at $9.92, an increase of 9.25%.

Mentioned in this article:

BridgeBio Pharma Inc. Nasdaq: BBIO

Cytokinetics Inc. Nasdaq: CYTK

Etsy Inc. Nasdaq: ETSY

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